Glossary
GLOSSARY California Insurance Bad Faith Litigation Terminology
Actual Cash Value
Many homeowners insurance policies provide for some form of replacement cost coverage in the event of a loss to the structure of the home. However, many of these same policies allow an insurance company to only pay the Actual Cash Value (ACV) until the home is repaired. To determine the ACV, insurance companies determine the cost to make the repairs, then deduct an amount for depreciation. The problem with this is that the amount deducted for depreciation may be arbitrary and without valid justification, resulting in an underpayment to the insured at the outset.
Adjuster
A person who handles and evaluates an insurance claim to: (a) determine coverage; (b) investigate the claim; (c) assist the insured; (d) determine the amount owed by an insurance company if there is coverage; and (e) ensure that the covered claim is promptly paid.
Alternative Living Expenses (ALE)
Under most homeowners policies, insurance companies are required to pay for alternative living arrangements for the insured and his or her family while the home is being repaired. There ordinarily are monetary limits on this type of coverage. This is often referred to as ALE.
Aspergillus
This is a family of molds found in homes that have been saturated with water and not properly dried out. Some types of Aspergillus have been found to be toxic.
Claim File
The file of all documents, communications, notes, photographs, etc. generated and/or obtained by an insurance company during its investigation of a claim. The claim file must contain everything that was done on the claim, so the insurance company’s handling of the claim can be reconstructed.
Clear and Convincing Evidence
In a civil trial, the plaintiff – or the insured in a bad faith case – has the burden of proof as to each element of each cause of action. This means that the evidence presented to prove his or her case must be shown to be more likely true than not true. This is called proving the case by a preponderance of the evidence. To prove that a defendant is liable for punitive damages, the conduct must be proven by clear and convincing evidence. This is a higher standard than proof by a preponderance of the evidence. This means generally that to prove one’s punitive damage case, the facts must be highly or more probable of being true than by a preponderance.
Contract damages
Contract damages generally are the foreseeable damages due from a contract breach. In the insurance area, these are the benefits that are owed under a policy when a claim is made. For example, in a homeowners policy for property damage, contract damages are the costs to repair the home pursuant to the terms of the policy.
Contractor of Choice
Pursuant to the California Fair Claims Settlement Practices Regulations Section 2695.9 et seq. a homeowner has the right to have his or her home repaired by a contractor that they want – not a contractor selected by the insurance company.
CGL Policy
CGL Policies are Comprehensive General Liability Insurance Policies, usually purchased by businesses to protect them in the event of a lawsuit against the individual owner(s) and/or the business. Generally, under such policies, the insurance company promises to defend and indemnify the insured if the insured is sued.
Court Ordered Mediation
This is an informal settlement process that the parties are required to go through by most courts before trial. Typically, all parties and their attorneys are required to attend; however, the parties do not provide formal testimony.
Damages
These generally are the losses incurred by a person or entity due to negligence, breach of contract, and/or wrongful acts and/or omissions which may be recovered
Demand
A settlement demand is the amount that plaintiffs/insured’s state that they want in order to settle a case. The lawyers of Viau & Kwasniewski usually only make demands within the context of a mediation regulated by a mediator. Informal demands outside of a mediation context, in our view, are usually counter productive to the plaintiff and/or insured.
Defective Product
A product is defective by law in California if it contains a design defect or a manufacturing defect that cases injury.
Discovery
This is the process that lawyers go through during litigation to obtain the evidence to prove their client’s case at trial. This includes taking depositions of the parties, depositions of third parties by subpoena or agreement, obtaining documents and records by subpoena, requesting production of documents from the parties, submitting written questions to the parties called interrogatories, and so on. This is a very critical part of litigation. Many times, insurance companies and corporations do not voluntarily produce this information, and the lawyers for the insured must file motions to force production of the evidence. Usually, lawyers must aggressively pursue discovery to maximize the likelihood of a good result in either a settlement, or a jury finding for the insured during trial.
Emergency Preferred Vendor
These are contractors that have an on-going contractual relationship with an insurance company, and which are contacted in the event of a fire or water loss. These vendors typically are supposed to go to an insured’s loss, and make emergency repairs or take appropriate action to prevent further damage – such as mold formation in the event of a water saturated interior of an insured home.
English Common Law
The law of England based on ancient customs and/or from the judgments of courts whose judgments become law. It is the law of legal precedent. Common law does not obtain its authority from the actions of a legislative body. France, on the other hand, is a civil law country upon which all laws derive their authority from legislation and not the precedent set by judicial decisions. (When modern day politicians say that judges should not make law, they ignore the fact that in a common law country like the United States and the United Kingdom, judges are often required to make law.)
Estimate
An estimate is the actual cost necessary to make home repairs based on a scope, or list of everything that must be done, to repair a home or other insured structure.
Exhibit List
A list of all Exhibits that a party may use at trial. These lists are required by the courts before trial, and they usually have to be done jointly with opposing counsel. Often the courts require that the parties agree to foundation and admissibility ahead of time to the extent possible to so that the trial proceeds efficiently.
Expert
In many civil lawsuits, litigation experts are often used to provide expert opinions on a subject matter that is beyond the knowledge of the general public. Expert opinion is only allowed if the testimony can be helpful to the jury during trial. Expert testimony in litigation may encompass all areas of study or profession, depending on the issue in the case. In personal injury cases, for example, medical doctors usually are needed to testify about medical matters. In insurance cases, insurance claims experts, contractor experts, and appraisers are often asked to testify as experts.
Retained experts are those experts who have not personally witnessed any of the events involved in the trial, but who are allowed to testify as to their opinion and within their area of expertise. There are also non-retained experts, such as treating physicians, who have witnessed some of the events involved in the lawsuit before the lawsuit was filed. In California, there are procedural rules that must be followed to designate experts, and before any retained or non-retained expert is allowed to testify at trial.
Implied Covenant of Good Faith and Fair Dealing
There is an implied obligation in every insurance policy in California that an insurance company cannot do anything that would injure the insured’s right to receive all benefits due under the insurance policy. If an insurance company handles an insured’s claim unreasonably, the insurance company may have breached the implied covenant of good faith and fair dealing, and is said to have acted in “bad faith.”
In limine Motions
Motions that are filed with the court before trial to prevent inadmissible evidence from being presented to the jury.
Indemnify
To pay an obligation such as a settlement or judgment on behalf of another person. If an insured is sued, has liability insurance, and there is coverage under the terms of the policy, the insurance company may be obligated to indemnify the insured. Such indemnity requirement may take the form of the insurance company having to pay an obligation owed such as a settlement or judgment.
Insured
The persons or entities named or described as insureds under a policy of insurance who are entitled to make a claim under an insurance policy
Independent Scope
This is a scope which is a list of all of the work or tasks that must be done to properly repair a home. An independent scope is determined by an independent inspection of the home, without referring to some other person’s scope, measurements, or notes, and without the undue influence of another person or entity. Insurance companies have, in the past, not have had truly independent scopes prepared for them.
Jury Instructions
These are written instructions concerning the pertinent law that applies to a case. The trial lawyers are required to provide these instructions to a judge before the outset of a trial. The lawyers argue to the judge, outside of the presence of the jury, about the instructions that should be read by the judge to the jury before, sometimes during, and after the trial. These instructions are critical to the case. If the instructions contain a wrong statement of the law, or other errors, the jury may decide your case incorrectly and render an inadequate verdict. If the error is serious, there may be a mistrial, or the case may be appealed and reversed by the Court of Appeal.
Large Loss Field Adjuster
An insurance company adjuster assigned to handle a large claim, and who actually inspects the loss – such as a damaged home. The Large Loss Field Adjuster adjusts the claim on behalf of the insurance company. A large claim is determined by the insurance company. In some circumstances this type of claim may involve a loss exceeding $75,000.
Liability Insurance Policies
Contracts of insurance in which the insurance company promises to pay its policyholders’ liability to other persons harmed by the conduct of the policyholder. (An example of this is automobile liability insurance that most of us have on our cars. If we make a mistake and cause an accident and harm someone, our liability carriers are supposed to pay for the harm we caused to others in the accident.)
Lowball Estimate
This is vernacular for an estimate which is ridiculously and unconscionably low.
Managing Agent
An employee who exercises substantial independent authority and judgment in his or her corporate decision making capacity. Such decisions may ultimately determine corporate policy.
Mediation
This is an informal process outside of the court system which is used in almost every case to attempt to settle the case before trial. A mediation is regulated or moderated by a mediator who is hired by the parties to help settle the case. Often mediators are retired judges, appellate court judges or lawyers.
Mitigation of Damages
In any legal action, it is the plaintiff’s duty to take reasonable steps to minimize his or her damages/losses, and to attempt to prevent further damage.
Mold Remediation
This is a cleaning and removal process used by professionals to physically remove mold contaminated carpet/drywall etc. This often includes the use special cleaners and disinfectants to prevent the mold from further growth and development.
Penicillium/Aspergillus
Penicillium and Aspergillus are types of molds that are found in nature. If a home has been internally soaked with water, these molds can form at much higher concentrations than normally found out of doors. When mold testing is done inside a home, Penicillium/Aspergillus levels are often reported together as a total without an indication of the amount of each type of mold.
Product Liability Theories
In product liability actions there are primarily three bases (theories) of recovery. These include design defect, manufacturing defect, and defective warnings. To prevail in a product liability action, a plaintiff generally must show at a minimum that the product was defective and that the defect caused injury or death.
Public Adjuster
These are adjusters licensed by the state that may be hired by the insured to advise and assist the insured with his or her submission of the insurance claim to the insurance company. Public Adjusters also negotiate on behalf of the insured regarding the claim with the insurance company adjuster. Public Adjusters are usually compensated by some percentage of the amount of the insured’s claim that is paid by the insurance company.
Punitive Damages
Damages awarded against a defendant when the defendant has been found by clear and convincing evidence to have acted despicably and in a conscious disregard of the rights of others. These are damages that are meant to punish and deter unconscionable conduct. A corporation or insurance company cannot be liable for punitive damages unless the unconscionable conduct was ratified or approved by a managing agent of the company.
Ratified and Approved
A Corporate or insurance company defendant cannot be held liable for punitive damages unless a managing agent approves the unconscionable conduct at the time it occurred or later ratifies the conduct (approves the conduct) after it has occurred.
Replacement Cost Value (RCV)
This is a term used in Replacement Cost insurance policies which refers to the cost to actually repair a damaged property. When contractors prepare estimates to repair a home they are essentially stating the replacement cost value without deducting any depreciation.
Scope
This is the list of everything that must be done to repair a damaged home. An accurate estimate is impossible to obtain without a proper and complete scope.
This is the list of everything that must be done to repair a damaged home which includes estimates of the costs to make the home repairs listed in the scope.
Seventh Amendment of The United States Constitution
In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury shall be otherwise reexamined in any court of the United States, than according to the rules of the common law.
Statement of the Case
A short description of the case read by the judge in open court prior to the selection of a jury.
Supplements
Few initial scopes and estimates are 100% accurate. Therefore, insurance companies often allow and will pay for supplements for scope items that could not have been found or anticipated, and were later discovered during restoration construction. However, it is improper for a contractor to under-bid a home repair project simply in an attempt to get the job, and then try to make up for any shortfall with supplements.
Summary Judgment/Adjudication
Almost all insurance companies file motions for summary judgment or summary adjudication before a trial in a bad faith case. This is a motion used to ask the judge to throw out the entire case, or portions of the case, instead of letting a jury decide the pertinent factual issues. This is a very serious motion, and must be vigorously opposed with admissible evidence, to show that there are material facts in dispute which must be decided by a jury. If the plaintiff/insured loses a motion for summary judgment, the case is over, and the insured gets nothing – unless there is a successful appeal. If the plaintiff/insured loses a motion for summary adjudication on a separate cause of action, or its request for punitive damages, the value of the case may be greatly reduced.
Tortious Breach of the Insurance Contract
This is synonymous with “bad faith” or breach of the implied covenant of good faith and fair dealing. Simply stated, it is the unreasonable handling of the insured’s covered claim, potentially exposing the insurance company to liability for the insured’s tort damages.
These are damages, in addition to contract damages, caused by the insurance company’s breach of the implied covenant of good faith and fair dealing. In other words, if an insurance company handles an insured’s covered claim in an unreasonable manner, it has breached the implied covenant (acted in “bad faith”), and may be subject to tort damages. Such damages may include emotional distress, lost income, lost opportunity costs, attorneys’ fees, litigation costs, medical expenses, additional living expenses, lost profits, and so on. Tort damages include any damage that is caused by an insurance company’s bad faith, whether such damage could be anticipated or not.
Tort Law
The area of law that developed in the English Common Law other than breach of contract, which imposes a duty by operation of law on all persons to avoid harm to others. The breach of this obligation gives the injured person a right to be compensated for damges suffered.
Trial Briefs
These are reports or briefs prepared on legal issues in a trial that contain the legal and factual arguments of the parties. Trial briefs are presented to the judge, and may request critical legal rulings during a trial. These may include rulings on jury instructions, how the trial should be conducted, the order of the presentation of evidence, and so on. Good trial briefs may mean the difference between a good and poor result at trial.
Witness List
This is a list of all of the witnesses that may testify during a trial – except witnesses who may be called only to discredit (impeach) another witness. The list must be complete at the beginning of the selection of a jury; any witness left out may be precluded from testifying. Additionally, judges often request that the anticipated length of testimony be included in the lists so that the judge can get a good idea of the approximate length of the trial.
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