Is the legal system rigged against people; and in favor of big business or does it just seem that way?

People believe the law has the ability to go whichever way the judge wants to decide the case. It’s what people refer to as result-oriented reasoning.  If you want a certain result you pick these legal principles and the result is possible. That’s how people view the law and frankly its how most lawyers and judges do, except we don’t admit it publicly. Today’s case has a result that most people will find offensive in that the proof required to prove a fact seems watered down in favor of an insurance company winning. If we asked the court to believe what this insurance company did, we'd lose ten out of ten times.

Judge says John Kline home’s former insurer doesn’t have to pay bank, Register, January 7, 2011

Let’s put this issue in perspective: Most people assume that if they came into court accused by an insurance company of not having paid their homeowner’s insurance premium, that proof would required a cancelled check to show you did mail a check. That’s true for people but apparently not for an insurance company. In this case the insurance company’s proof was simply the description of a computerized mailing system. The insurance company was not required to show an actual paper letter putting the mortgage company on notice, as an additional insured, of nonpayment of premium. That seems odd to me because if I suspect that sometime in the future I may have to prove mailing, I keep an actual copy of the signed letter and stamped envelope. As an example I think of making income tax estimated payments. I copy the check and the coupon along with the actual stamped envelope. I assume just saying my system is set up to send it out should be good enough, won't be good enough to prove the "fact".

1984: We are there; the law now finds machines are more believable than humans.

In Polk County, Iowa there is a case Federal Insurance Co., aka Chubb Group vs. Two Rivers Bank. The issue being argued would result in an insurance company paying a bank for the losses it suffered on a mortgage when the insured’s house caught fire. The insurance company and the bank were suing over whether notice that the insured hadn’t paid the premium had been made. The bank said it never received a notice of cancellation; the insurance company said while it couldn’t produce a copy of the letter putting the bank on notice of nonpayment, that the computer system was set up to send a notice and therefore proof of notice is the system itself. Here in my  words was the Chubb’s argument: “Even though we can’t prove it, we think we did and as an insurance company, that’s proof enough.” This sounds an awful lot like the gibberish left over from the tort reform era. If an insurance company as a system says the sky fell on a certain day then unless you can prove the sky didn’t fall on that day, then as a human, you lose. Remember the insurance industry claimed there were thousands and thousands of frivolous lawsuits and that lawyers were getting rich off of worthless cases by using a contingent fee contract. Of course that made no sense because a frivolous case is worth nothing, and one-third of nothing is, drum-roll please, NOTHING, NADA, ZILCH. How does one get rich off of nothing? That’s possible only on Wall Street, not Main Street. Let’s get to the instant case because it involves a developer, a house fire, premium notices, an insurance policy and a notice of nonpayment of premium that no one can produce.

The housing meltdown saga continues to reverberate throughout the courtrooms of America and in that respect Iowa is no different. Developers of housing tracts and commercial buildings found themselves naked when the tide turned south and as the economic waters receded some bills just didn’t get paid. What if one of those bills was a homeowner’s insurance premium payment? What if that bill never got paid; even though there was a mortgage, what then? If the premium payment wasn’t made by the homeowner, but there was a mortgage, wouldn’t you think the insurance companies would have to send a notice advising the mortgage company of the nonpayment and soon occurring lapse? This is a pretty important issue because once the policy lapses, there is no insurance and the bank’s loan is at risk of a complete loss. If the house burns to the ground and there is no insurance to rebuild it the mortgage is almost worthless. It's worth the market value of the foundation and land minus the cleanup costs. You get the picture I’m sure.

Doesn't anyone just pick up the phone? A simple phone call and none of us would be reading this, there would be no lawsuit and the lawyers and judge would all be fishing of the dock of some bay.

So in the end the insurance company wouldn’t pay, they refused to pay the bank for its portion; and the bank then sued the insurance company because, as it plead its case, we didn’t receive a lapse notice. How can we make a premium payment if we, the bank, don’t know the insured isn’t making the premium payment? Isn’t that what the additional insured provision is all about?

Off to the Polk County Courthouse we go.

So how does the bank prove a nonevent? They can’t. The rules of evidence should point in the direction of the insurance company to prove it served a notice of nonpayment. To do so should be easy; at least you’d think so since it allegedly sent a piece of paper to the bank. Proof would seem as easy as showing a copy of the piece of paper, but nothing is easy for humans when insurance companies are involved with paying money. And this case proves my point. Even though the insurance company couldn’t produce the copy of the cancellation notice they won the point and the case and get to keep the dough.

Common sense would tell us a different rule of evidence should be applied.

Shouldn’t the burden be in the party that sent the notice; because after all they control the evidence? In that vein wouldn’t proof that an actual paper notice was sent, (just keep a copy), be required to be sent to the mortgage company that insures the property? You’d think so now wouldn’t you?  But that’s not what this case holds.  Apparently a mailing system that can’t produce a copy of the actual notice but is set up to show what it thinks it did trumps human testimony that bank employees are paid to open paper mail and to process it; mail that was never received. Frankly I don’t understand the ruling, but I wasn’t in the courtroom and didn’t hear the evidence. I can almost guarantee that if I were the judge the result would have been different.

Here is from the Des Moines Register’s article about such a case:

Evidence introduced during the Federal Insurance trial disclosed that bank officials were subpoenaed to appear before a federal grand jury in August 2009. No indictment has been filed.

During the trial, Two Rivers lawyers argued that no bank employee received a cancellation notice and that a search for the notice turned up nothing. As a result, the lawyers contend, state law requires that the insurance company be held liable for a prorated share of the mortgage loss and for legal fees.

But Federal Insurance responded that although it cannot provide specific proof that the lender received notice, its elaborate mailing system in New Jersey provided "a presumption of receipt by Two Rivers."

Hutchison agreed with Federal Insurance, adding that the testimony and evidence presented by Two Rivers failed "to prove that it is entitled to any judgment against the defendant."

"The bank did not have a reliable policy for maintenance of important documents, including those related to insurance matters," Hutchison wrote. "Unlike Federal's automated system which guarantees a document is mailed, Two River's document-handling procedures are not automated. They are entirely dependent upon human compliance with unwritten and discretionary procedures."

Insurance companies are powerfully and all knowingly arrogant. Their unstated mantra is “We win and you lose.” No wonder people are pissed off. From a layperson’s point of view this result makes little sense. Saying your computers must have sent it wins out in court over humans that say they didn’t receive the notice of cancellation. If the rules apply equally to policy holders then I should be able to come to court and describe a computerized mailing system that guarantees premium payments have been sent and that should trump the insurance company saying no payment has been received. This makes little sense to me. I for one would appeal this ruling.

The insurance industry shields itself by using us, the lawyers, to do its dirty work. So stop wondering why people in general simply hate us. We aren't the messengers; we are seen as the King's assassins. Any one that thinks otherwise is suffering from delusion. The only question I want answered is how do we quit the Monarchy?

To read the decision underlying this case follow this link to my lawfirm website. (At the time of posting this my site was down so I'll fix and add the link at a later time.)