PROBLEMS IN LAWYER BILLING

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HOW TO THINK ABOUT BILLING TWO PROBLEMSMichael Sean Quinn, Ph,D.,  J.D.The first problem is that time records are always estimated to one degree or another, although bar leadership makes it sound like exactitude is required.  That can’t be done. The real effort, I think, is to try and make sure that lawyers don’t overbill, something which is a great temptation. The most honest and authentic way to do this is to tell lawyers, especially young lawyers, not to overbill since it is both dishonorable, unethical, and may even be a crime. The second problem is what to do about recording the time a lawyer spends on finding, thinking up, about, or through a problem.  Some of this might be called “ponder-time.” Of course, any sophisticated lawyer working on a complex case will need and is required to use such time?There are two subdivisions built into this second problem. The first one is that clients don’t like or trust this description of time. Many think that it is quite usually, or at least often is, “phony time”–something illegitimately made up, or, fiction and hence fraud. Many clients are inclined to think that good lawyers already know whatever there is to know and so should not be billed for what the lawyer should (or does) already know. One way to handle this is for the lawyer to call ponder-time “research” or “investigation.” I guess these make some sense, though it’s not quite true. Another way is to pad other parts of the bill by a few minutes here and a few elsewhere. That’s contrary to ethics and law. I’m even less clear how to think about “dialogue time.” Virtually all really good lawyers spend time in dialogue, reciprocal argument, or joint discussions. Face-to-face; over the phone; using zoom. All thinkers and practitioners on virtually every subject do this. Philosophy, mathematics, engineering, construction, architecture are all roughly the same about this–granted there are a few–a very few–radically introverted people as to thinking and planning who go it alone, no matter what.I confess: I don’t have a good idea how to deal with this second problem. For some, it’s a very important one.

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ALL RISK POLICY: WHAT’S “DIRECT PHYSICAL LOSS”: A BRIEF DISCUSSION

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 ROAD WORK DISCHARGED DUST,DIRT, GRIME, AND DEBRIS ON/IN RESTAURANT:WAS THERE “DIRECT PHYSICAL LOSS”Michael Sean Quinn, Ph.D., J.D.This post is a brief discussion of part of a decision in the U.S. Court of Appeals for the Eleventh Circuit regarding coverage in a property insurance case decided under Florida law. Mama Jo’s Inc. [dba Berries] v. Sparta Insurance Company, 18-12887 (August 18, 2020).  D.C. Docket # 1-17-cv-23362-KMM (Southern District of Florida).The policy was an “all risk” policy providing coverage for “direct physical loss” and loss of business income caused by direct physical loss.  This post concerns only “direct physical loss.”A nearby construction project “deposited” side-effects of a construction project on and in the restaurant for something like a year and a half. Dirt, dust, and debris were all over everything, as they say, and clean-ups were required on an “everyday” basis.  Of course, the number of people wishing to dine at Berries declined during this period. But that is a different matter.The owner of Berries filed a claim with Sparta, its property insurer, and it denied the claim. A central question in the claim was whether Berries’ has sustained covered property damage and/or a direct physical loss.  Sparta said “No,” and that was a central issue in the suit under discussion.  Only that aspect will be considered here.  The position of the insurer was that in order for there to be a “direct physical loss,” there must be physical damage to covered physical property, at least in a case of this sort. (“Loss of” and “physical damage to” are often intimately related concepts.)To be sure, Sparta conceded, “yuchy” stuff from the construction project was inflicted on the restaurant. Indeed, during the time of the project, the restaurant had to clean for it every night.  This cost was the fundamental part of Berries’ physical damage case. The problem was that the restaurant used all the same cleaning techniques it used every day. Nothing was done more frequently; no were new components added to the cleaning menu. After clean-ups were conducted, furniture, equipment, and other physical objected did not manifest physical damages–no holes, no scratches, no bends, etc. Nothing had been rendered physically unusable. The district court had held that there was no physical damage and no physical loss proved-up, and so no coverage. (Of course, if there is no physical loss, there can be no covered loss of business income..)Now, this post does not tell the whole story. There was a second phase. Moma Jo’s revised its claim substantially after the claim was first filed. It made claims based upon physical injury to various equipment not in the claim as first submitted, e.g., electronic entertainment equipment, among others. Moma Jo’s new expanded claims did not succeed. As the courts saw it, expert testimony was required as to the newly claimed losses, and the work of each of the proposed experts was significantly defective and hence unreliable. In a different context, I recently (10/01/21) discovered that the term “direct” comes up and is contested in all sorts of different types of insurance (or near insurance) cases, such as some types of bond disputes (e.g., involving fidelity bonds), and that there is a large number* of different meanings or different criteria for deciding directness versus indirectness. (*Many lawyers love the word “plethora”; I am not one of them.)1300 West Lynn, Suite 102 Austin Texas 78703PO Box 162344  Austin Texas 78716(o) 512.768-6840(f) 512.768-6842(q-c) (512) 656-0503(email) qclaw-adr.com(another email) mquinn@msqlaw.com   

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SKETCH ARGUMENTS FROM AMBIGUITY

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 A SKETCH: COVERAGE ADVOCACY &DETERMINATIONS OF POLICY MEANINGS:OBLIGATIONS OF POLICY-HOLDER LAWYERSMichael Sean Quinn, Quinn & Carmona LLPSometimes, the meaning of the language in the insurance policy is the key to whether the insurer or the insured wins the case.  More than occasionally, interpreting insurance policies depends upon–or can be made to depend upon–ambiguities found in the language of the policy.It is extremely difficult to succeed in finding an ambiguity when the policy is an oft used form, especially those formulated, approved, or required by some governmental agency.  Nevertheless, ambiguities exist in all verbal discourse, so it is the duty of the policyholder lawyer to try and find them–or “it.”  One might say that it is the duty of such a lawyer to look for ambiguity, even if that required her/him (“hh”) to go down several rabbit holes or into several data mines.  (Going down  (at least some) rabbit holes is not the same as chasing wild geese that are not flying. Leave out the last 4 words of the last sentence, and you might well have a genuine ambiguity.)(Interestingly, the maxim “Look for ambiguities” is something like the maxim governing the work of claims handlers, “Look for coverage.”)Ambiguities are to be found in interpretive legal reasoning if and only if, there is a genuine, semantic disagreement as to the meaning of a term or phrase, when considered from an objective, extra-case-based point of view. Since the practice foundation of legal argument is to be found in adversarial proceedings, it is natural that each party will try to interpret contract/policy language in a way that most favors its position; hence it is important to have more objective criteria for what counts as an ambiguity. Sometimes courts say things like this: The “‘Ambiguity Rule’ is triggered only where there is a genuine ambiguity as easily recognized in common usage.” This maxim is excellent rhetoric in the context of judicial reasoning, but it not exactly descriptive.Therefore, the policyholder lawyer must keep in mind that the odds are against hh. The usual rule on ambiguities makes it difficult to find a usage or set of definitions upon which to rest a winning interpretative argument. Nevertheless, it is the duty of hh, to try hard to find one. There is some law and/or public policy that tends to favor insureds, to some degree, so–while there are no completely objective criteria favoring insureds–there is “a little bit.” It is the duty of hh for the policyholder to exercise immense energy to fine it or them. Here are several beginning points: Ponder the language, using imagination, among other “things”; Consult several different dictionaries (modern, digital, ancient);Use at least one thesaurus;Survey others, having learned how to ask and how to listen;Scour cases using one word or one phrase plus either “ambiguous” or “ambiguity” in the same sentence; Construct “thought experiments” in which there are dialogues in which  possibly ambiguous terms play an important role.  1300 West Lynn, Suite 102 Austin Texas 78703PO Box 162344  Austin Texas 78716(o) 512.768-6840(f) 512.768-6842 (q-c) (512) 656-0503(email) qclaw-adr.com(Immediate Need or Lack of Awareness:q-email) mquinn@msqlaw.com 

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BRIEF SKETCH–TEXAS PAYMENT OF APPRAISALS AND INSURER STATUTORY BAD FAITH–AGAIN

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 BRIEF SKETCH: MARCHBANKS v. LIBERTY INSURANCE CORP. (TEXAS 2020)INSURED FILES FIRST-PARTY PROPERTY CLAIM; CONTROVERSY OVER AMOUNT OF LOSS; APPRAISAL; INSURER LOSES;  INSURER PAYS APPRAISAL AWARD; INSURED STILL HAS RIGHT TO SUE INSURER UNDER TEXAS PROMPT PAYMENT OF CLAIMS ACTMichael Sean Quinn, Ph.D., J.D. Quinn & Carmona, 1300 West Lynn Suite 102, Austin, Texas 78703The case is William Marchbanks v. Liberty Insurance Corporation, 18-0977 (Tex. June 19, 2020). The issue therein was “whether an insurer’s payment of an appraisal award bars an insured’s claims under the Texas Prompt Payment of Claims Act (TPPCA), codified as Chapter 512 of the Insurance Code.” Since the Court had twice held previously that it did not, the Court reversed the judgment in the court of appeals in this case by means of a per curiam opinion and sent the case back to the trial court to consider Marchbanks’ TPPCA clams in the light of its previous year-old decisions.The previous cases were Barbara Technologies Corp. v. State Farm Lloyds (589 S.W.3d 806, 820 (Tex. 2019)(“[P]ayment in accordance with an appraisal is neither an acknowledgment of liability nor a determination of liability under the policy for purposes of TPPCA damages under section 542.060.”) and Ortiz v. State Farm Lloyds, 589 S.W.3d 127, 135 (Tex. 2019)(“[A]n insurer’s payment of an appraisal award does not as matter of law bar an insured’s claims under the Prompt Payment Act.”)). The Texas Supreme Court decided those two cases on the same day.It is easy to see why this case (Marchbanks) was controlled by the two previous cases. The adjustment history tells the whole story.There was a storm. Marchbanks filed a first-party property claim regarding his residence claiming it sustained hail and wind damage. The insurer inspected and found no damage resulting from the storm. Fifteen months later, Marchbanks sought a second inspection. This time the carrier found $387.00 in damages but denied the claim again since that amount was less than the deductible. It took 3 months for Liberty to let Marchbanks know its denial decision. Marchbanks sued for breach of contract and statutory bad faith. Six months thereafter, Liberty sought a court order requiring an appraisal. It took place. The damage number went up again. This time, Liberty paid the award and sought summary judgment as to all Marchbanks’ claims. The trial court granted the motion and entered a take-nothing judgment against Marchbanks,  The Court of Appeals erroneously affirmed.  558 S.W.3d 308 (Tex. App.–Houston [14th District.] 2018). The general principles for why the Supreme Court reversed are set forth above.  This case nicely illustrates why the Supreme Court made sure the principles it enunciated in 2019 stay put. The facts of this case are simple enough. Viewed from the insured’s point of view they are these:Marchbanks’ (M)house was damaged in a storm. The insured filed a claim and the insurer denied that it was and refused to pay.M sought another inspection 15 months later.Liberty (L) did so, reversed its original denial, but found the damage to be less than the deductible.L reported its second denial 3 months later.  M sued L. L asked for an ordered appraisal Appraisal occurred. The amount of the damages and therefore the award was determined. L paid. M moved for an obtained summary judgment.In the trial court, M got nothing.The court of appeal continued to refuse recovery. The case goes to the Texas Supreme Court.Now it goes it back to the trial court, and the whole litigation process begins again.So, what did M experience? Two denials. Several delays caused by L, after one caused by him (it looks like). Defeat in the trial court and then another retreat in the court of appeals. The denials were unreasonable–after-all, L reversed them. L’s delays were unreasonable. No doubt M experienced them as such; with little doubt, M was treated wrongfully; probably L was not paying attention, or someone was determined not to pay this claim.The fact that L eventually paid the claim did not exonerate it from treating M wrongfully along the way.* But this is the sort of thing actions for insurance bad faith, whether statutory or common law, was designed to make insured’s whole and to prevent insurers from entering into this kind of conduct and to prevent itself from this sort of conduct.*How should one count the instances of wrongful conduct when it essentially involves delay or periods of time caused by an unreasonable error which occurred as an event on a particular day.  It does not seem sound to count an unreasonable delay as simply one error. An insurer’s unreasonably not paying for a significant period of time does not seem like one act of bad faith, or even one continuous act of bad faith. Somehow, an unreasonable delay–or a series of unreasonable delays–should be counted as more than one act. Maybe one per day would give a better idea, i.e., one act of refraining from paying per day.  A delay of a month would be counted as one act per business day.In any case, from the point of view of sound legal thinking and reasoning, it would be absurd to let bad faith insurers off the hook of paying damages simply because they eventually paid the claim after a considerable amount of falderal and an appraisal. In fact, the law’s doing things that way would encourage just the sort of errors to be found at the foundation of this case. Given the 40 years of my experience in insurance law and adjusting, it is difficult for me to believe that a respected insurance company would deliberately attempt to “f” an insured out of a right to tiny compensation simply because the claim was so small that an insured would be unlikely to pursue it.  However, someone with a more cynical imagination than I have would be able to think of what happened in this case as exactly that. Well, the case is now back in the trial court and the bad faith issues will now be tried. It will be interesting to see how it goes.  Interestingly, the length of time between the damage-causing event and later this year will make proof more difficult. Then again, the insurer’s claim file will be a great source of evidence, as will the faulty memories of the adjusters. My guess is that it will not be tried. Certainly, if I were advising L, I would suggest that a settlement be reached, and this time that it will be more than a few hundred dollars.1300 West Lynn, Suite 102 Austin Texas 78703PO Box 162344  Austin Texas 78716(o) 512.768-6840(f) 512.768-6842(q-c) (512) 656-0503(email) qclaw-adr.com(Transitional Alternative: mquinn@msqlaw.com )

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Interpreting Insurance Policies

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AMBIGUITY & INTERPRETING INSURANCE POLICIES: A QUASI-RADICAL SUGGESTION SKETCHEDMichael Sean Quinn, Ph.D., J.D.Quinn and Carmona, A Law FirmAustin, Texas Everyone involved in insurance coverage knows that contracts are interpreted against the drafter if there an ambiguity. This rule applies with special force, although the criteria for what counts as ambiguous is about the same across contract law, or so the theory goes.  In truth and practice, some judges are more sympathetic to finding ambiguity than others Irrespective of judicial outlooks, undoubtedly not every disagreement between an insurer and an insured as to the meaning of the language of the policy counts as an ambiguity. So how is a judge to determine ambiguity? S/he is to look at ordinary usage. If there are relatively clear differences in legitimate usages to be found there, then there is ambiguity; if there are no such differences, then there is not.  Dictionary entries may also help. Unquestionably, determining ambiguity is up to the judge as it is regarded as a matter of law and not a matter of fact.  But is it really always a matter of law?If a decision as to ambiguity must be made for a highly technical scientific and/or engineering–not to mention mathematically area–should a judge simply decide such a matter? My impression is that the answer is “No.” The judge will get reports from a number of experts as to the subject matter and as to the use and meaning of the relevant language. But, of course, different areas in which lawsuits arise are of varying degrees of esoteric complexity. Furthermore, it is often the case that different types of business insurance have special vocabularies and are therefore not dependent upon and may be at variance with common common usage of language.  In one important case, for example, the insurer claimed that the term “blanket insurance policy” had an established meaning that was used industry-wide. This claim was completely false, and it would have saved a fortune in processing the case if an expert on the relevant language had submitted an affidavit and been deposed. Lurking around in the background is fact that the legal profession as a matter of history has simply not thought about. The problem is this. The legal profession draws a sharp distinction between “matters of law” and “matters of fact,” where the meaning of words is not a matter of fact. This outlook–or conceptualization–is simply false, as a general point. Studying language is often an empirical study and therefore a matter of fact.  One can study this form of inquiry and research in college and graduate school. Quite often, the study of language is an empirical matter. Interestingly, even those who research and write dictionaries do empirical research. A premier case of this is the Samuel Johnson dictionary from the Eighteenth Century, although the nature of his research was somewhat different than is now common.  In any case, as a general matter, “meaning determination” and therefore “ambiguation identification” are not simply contemplative matters or anything like simply legal research; often experts are needed, although some cases are so simple that any educated person can easily know from common usage and common knowledge what terms mean and which ones are ambiguous. Not even computerized or digital searches always make a substantial difference. Now, I understand that my suggestion is not just a minority view but a largely rejected view–to the extent that anyone has thought about it all. Still, it seems wise to me that litigators should keep this view in mind and act on it. For example, counsel should consider using language experts on subtle, difficult, or specialized matters. Court opinions and participants in a given industry are not the particular good standards, except for extraordinary matters involving science, mathematics, and/or contemporary engineering. As always, in almost any issue involving insurance policies, the claims process should be kept in mind. How do the words of the policy work is always a question claims handlers need to keep in mind and sometimes focus on. Coverage lawyers sometimes see themselves as more than advisors to claims people. Claims managers are often more important in this regard than dogmatic coverage lawyers. 1300 West Lynn, Suite 102 Austin Texas 78703PO Box 162344  Austin Texas 78716(o) 512.768-6840(f) 512.768-6842(q-c) (512) 656-0503(email) qclaw-adr.com(ImmediateNeed or Lack of Awareness:q-email) mquinn@msqlaw.com 

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Quinn Quotes

A variation is never identical to that which is being varied upon.  This too is probably a necessary truth.  Both variances can be true at the same time. Then again sometimes they are something like contradictory, though probably not completely, given the meaning of “variation.”~Michael Sean Quinn, PhD, JD, CPCU, Etc.Tweet

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Michael Sean Quinn, PhD, JD, CPCU, Etc*., is available as an expert witness in insurance disputes and other litigation matters. Contact