Still Adjusting is Not Grounds to Dismiss Lawsuit

Three insurers moved to dismiss the suit brought by their insureds because, they say, they are still “adjusting” the claim. In the alternative, they sought a stay of the litigation pending the completion of their own investigation.

In Dewey Beach Enterprises,Inc. and Ruddertowne Hotel, LLC, v. Drass Insurance Agency, Inc.; Markel American Insurance Co.; Wilmpngton Insurance Co.; Catalytic Managers And Insurance Agency, LLC; Underwriters At Lloyd’s, London; SafetySpecialty Insurance Co.; and Guideone National Insurance Co., C.A. No. N20C-08-018 CEB, Superior Court Of The State Of Delaware (May 13, 2021) the Delaware court considered available court dates when faced with the motion to dismiss.

FACTS

In 2012, Plaintiffs began construction and renovation on a mixed-use property containing the Ruddertowne Hotel, the adjacent lighthouse, condominiums, and commercial event space (collectively, the “Project”). Plaintiffs retained Defendants to provide insurance coverage for the Project. The coverage was current through April 2020. On April 23, 2020, a fire — deemed arson by the Fire Marshall — consumed the lighthouse, the restaurant and damaged the adjacent decking, railings, piers, condominiums and commercial space. Plaintiffs have brought this action against the insurers claiming breach of contract, negligence and requesting declaratory judgment.

ANALYSIS

Defendants argue that because the Plaintiffs’ insurance claims are still being adjusted, any litigation is premature and is not ripe for adjudication.

A ripeness determination requires an assessment of whether the interests of the party seeking immediate relief – in this case the Plaintiffs – outweigh the concerns of a party in postponing review until the question arises in some more concrete and final form. The balancing test to determine ripeness for adjudication includes:

• a practical evaluation of the plaintiff’s legitimate interest in prompt resolution of the question presented,
• the hardship that further delay may threaten,
• the possibility of future factual development that might affect the determination made,
• the need to conserve scarce judicial resources, and
• a due respect for identifiable policies of the law touching upon the subject matter dispute.

The court noted that the Plaintiffs have a legitimate interest in prompt resolution, as they are paying the repair and rebuilding costs themselves, defeating the very reasons they purchased insurance. Plaintiffs have suffered hardships including loss of income and lengthened construction schedules that further delay will exacerbate.

There is no risk that the Court will render an advisory opinion, as the condition for coverage has been triggered and litigation appears to be unavoidable and there is no judicial economy served by piecemeal litigation.

The Court cannot sanction further delay when the precipitating factor appears to be that Defendant insurers are still investigating the claim. Such logic would give Defendant insurers carte blanche to take forever resolving their own coverage obligations while the Plaintiff loses the benefits of his bargained-for insurance coverage.

The Court is currently issuing trial availability dates in 2022 at the earliest. There is no illusion that these Defendants, or any other party, is being rushed into the Courthouse.

Should Defendants require a protective order from onerous discovery they are not yet prepared to answer, they may apply to the Court for relief. A blanket Order that dismisses the litigation or stays it indefinitely while the insurers investigate their options is not appropriate. Accordingly, Defendant’s motion to dismiss, or in the alternative, to stay litigation is denied.

Zalma Opinion

Professional claims investigators and adjusters should never take more than a year to make a coverage determination on a fire caused by arson. A professional claims person understands that arson is nothing more than a fire and is an insured against peril. An arson is only an arson-for-profit if there is evidence that the insured caused the fire for the purpose of defrauding the insurer. To try to stop the litigation by claiming the insurers have not completed their investigation is an admission of the inadequacy of the investigation. They should move heaven an earth to complete the investigation and if they have a basis for a claim of arson-for-profit they should immediately deny the claim and if not, they should immediately work with the insured to pay the claim.

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4