PADI getting sued over Insurance Program

[PuMpUi]

When I was insured with V & B, it was a "claims made" policy, meaning that I MUST STILL be insured when I am served with legal action, even when the alleged incident took place years prior, or there is no coverage, even YEARS after I have retired from teaching and diving.

My current insurance carrier (Witherspoon) is NOT a claims made policy, and I was told that "as long as I HAD insurance when the alleged incident occured" that they would cover me ("retroactively, so-to-speak"), even if they were not my insurance carrier at the time of the alleged incident.

Here's the Question : IF PADI was "acting as the insurance carrier" when in fact they were NOT an insurance company, did I ever even HAVE insurance to begin with?

IF that is the case, then WOULD my present insurance carrier be obligated to cover me for "prior acts" or not?

(I may not have used all of the correct terminology, but I think you can understand my concerns.)

 

[theduckguru]

Hey Guys,

My Attorney Rick Lesser has given me a Public explanation and some of the proof we have. That I am allowed to share with you. If you would like a copy it is in PDF. I need you to PM me your your name and email address and i will attach and send to you.

Rick will be posting this on other websites too, and Said he will come to Scubaboard and answer questions/ comments and concerns soon.

Thanks for the press release. Discover should be fun.

 

[ItsBruce]

When I was insured with V & B, it was a "claims made" policy, meaning that I MUST STILL be insured when I am served with legal action, even when the alleged incident took place years prior, or there is no coverage, even YEARS after I have retired from teaching and diving.

My current insurance carrier (Witherspoon) is NOT a claims made policy, and I was told that "as long as I HAD insurance when the alleged incident occured" that they would cover me ("retroactively, so-to-speak"), even if they were not my insurance carrier at the time of the alleged incident.

Here's the Question : IF PADI was "acting as the insurance carrier" when in fact they were NOT an insurance company, did I ever even HAVE insurance to begin with?

IF that is the case, then WOULD my present insurance carrier be obligated to cover me for "prior acts" or not?

(I may not have used all of the correct terminology, but I think you can understand my concerns.)

Note: The following is NOT legal advice.

There are basically two kinds of insurance policies "claims made" and "occurrence" policies. A "claims made" policy does not cover a claim unless it is first made during the time the policy is in effect. An "occurrence" policy does not cover a claim unless the injury or loss "occurs" during the policy. For purposes of an "occurrence" policy, the general rule is that an injury or loss "occurs" when the injured party actually sustains an injury rather than when the negligent act takes place.

Assume I negligently hydro a tank in year one, and as a result of the negligent hydro, it explodes in year four, but the victim does not sue until year six. Although the negligent act happened in year one, the loss "occurred" in year four. An "occurrence" policy for year four and an "claims made" policy for year six would be the only ones that would provide coverage.

Subject to the foregoing, it is possible to get a "tail" for a "claims made" policy. This is to address the situation in which someone with a "claims made" policy wants to get out of the business. Since there is no telling when a claim might be made, for an additional premium, the insurer will cover claims that are made even after the expiration of the policy.

Again, remember, this is not legal advice, but rather an explanation of some general principles of insurance.

 

[ItsBruce]

I've read the lawsuit. It is bound to be exciting. I know that I should not be surprised, but dang, Rick Lesser is good.

On a more pragmatic level:

1. I do not know what the law says about the legitimacy of insurance programs like what PADIi is alleged to have created. It is entirely possible that it is completely legal to do so.

2. If the program is not lawful, PADI could be in for a world of hurt.

3. If the program is lawful, then a lot will turn on what shops were actually told (orally or in writing) when they first entered the insurance program. It is easy to say "no one told me that." It is quite another to prove it.

4. I would expect that the legitimacy of the program will be tested and ruled on very quickly. In federal court,where this is pending, there is a procedure to test the validity of a legal theory. It is called a "12(b)(6)" motion or "motion to dismiss." If there is law authorizing a program such as the plaintiff alleges, then various of the claims will be summarily disposed of.

5. Regardless of the legitimacy of the program, I would expect that many of the causes of action will be dismissed out of hand. A "cause of action" is a legal theory that authorizes a recovery for a particular set of facts. One set of facts might support a recovery under any of several theories. For example, one might say: "Doing X constitutes a negligent misrepresentation;" or "Doing X constitutes a fraud." And, in truth doing X may constitute both. So it is normal for an attorney to allege each possible theory as a distinct cause of action. A double recovery is not allowed. However, by alleging alternate theories, it is more likely that one will survive to the point of a favorable verdict at trial.

As I see it, a number of the theories just don't hold up. The biggest problem is that for must causes of action, there must be damage that flows naturally from the act. (It is called "proximately caused damage.") I do not see where there is proximately caused damage for various of the causes of action. For example, if I were to tell you that if you pay me $100, I will use my connections and professional courtesies to keep you from being eaten by a shark on your next dive and you pay me the $100 and do your next dive without being eaten by a shark, and you then sue me for misrepresenting my ability to keep you from being eaten by a shark, you will lose because you were not harmed. So, with the insurance program, if you did not have a loss or you had a loss and were fully paid, no-harm-no-foul ... no cause of action.

6. I will be very curious as to how PADI defends itself. Most lawsuits are driven by the availability of liability insurance for the defendant. (How many people who cause auto accidents could actually afford to pay the legal fees for their defense?) Here, I would be amazed if PADI had any sort of insurance coverage for the kinds of things for which it is being sued. Thus, it is probable that it will be paying the lawyers by the hour.

7. Everyone who is in the PADI program, check your coverage with your attorney and/or broker!!!! The couple of hundred dollars you spend could save you a lot of grief later.

8. This promises to be very exciting.

 

[PuMpUi]

Thank you for the wonderful explanations, but they didn't answer the questions.

It would seem (and I am NOT an attorney) that in either type of coverage if a claim of action arises and I did not have insurance (even when I thought I did, and even when I was told that I did) that I am not covered by either the "claims made" or the "occurence" type of policy.

That was one of the questions.

I think that the lawsuit/allegations/evidence (I am not a judge or a jury member) indicates that PADI was acting as an insurance company on their insureds behalf since they had a $300,000.00 USD deductible to be met as the "self-insured" and it was not actually an insurance company that was providing the coverage.

As you stated ... discovery will be exciting.

 

[Rick Lesser - Divelaw]

INSURANCE DOCUMENTS FROM PADI’S INSURER SUPPORT
THE VALIDITY OF LAWSUIT CLAIMS

On Wednesday, PADI issued a press release stating the allegations set forth in the class action suit filed against it and others regarding their store insurance program were completely false. Other than stating the suit had no merit, no supporting information was provided. By contrast, the documents attached to this statement, which were produced by PADI’s insurance attorney as part of a PADI store member’s claim, tell a different story. As one example, PADI’s press release fails to mention that before Lexington Insurance has to pay any amount on a property or business interruption claim, PADI itself is responsible for paying a $300,000 self-insured retention, or deductible.

Attachment 1 is the Lexington Insurance Company property conditions sheet of the policy issued on June 30, 2009 to PADI Worldwide Corp. stating “Each claim for loss or damage separately occurring shall be adjusted separately and from each such adjusted claim, the amount of $300,000 shall be deducted.”

Attachment 2 is the property policy page from the June 30, 2008, property insurance containing the exact same $300,000 deductible relating to “each such adjusted claim.”

PADI’s press release also says the lawsuit “falsely alleges that PADI is collecting insurance premiums under the program”. It does not say, however, that PADI receives no portion (other than the $50 administrative fee) of those premium dollars.

Attachment 3 shows that PADI paid a total premium of $503,244 for this property coverage.

Our PADI store client paid approximately $3,300 for his store property coverage and business interruption coverage (Attachment 4), so if 1,000 PADI stores bought the same property and BI coverage as he did, the premium would have totaled about $3 million. If PADI paid $503,000 for the policy, where did the other $2.5 million in premium go? That is what the lawsuit is seeking to find out.

Attachment 5 is a portion of an August 16, 2010 letter from PADI’s insurance attorney to me, confirming that “Payments made to date (as part of the settlement of our client’s property claim) have been made by PADI as part of its Self-Insured Retention. Because the Self-Insured Retention has not been exhausted, YORK is still adjusting the loss on behalf of PADI.” (Emphasis added)

To date, PADI, not “Lexington Insurance Company” has paid out $88,800 on this single claim. Where did that money come from if not from the premiums of the PADI members? Again, the lawsuit seeks this information.

Attachments 6 and 7 are the two checks payable to our law firm and our client for his loss, written by “York” (a claims adjusting firm), but each check is noted “Exch Check,” and the last check specifies “EXCHANGE,” meaning that York wrote the check only after receiving payment for the claim from PADI.

Since PADI is NOT an insurance company, several insurance agents and insurance attorneys have advised us, after reviewing all of the documents produced by PADI’s insurance attorney that this scheme is completely improper, and it must be concluded that PADI is paying property claims out of store premiums that are collected from PADI members.

What is the truth here?

If you are a PADI insured dive store, there is a simple method of determining what the truth is. Look at your own insurance package received from Vicencia & Buckley. I am fairly certain you will not see any document with policy language related to any $300,000 deductible payment required to be made by PADI before the insurance is effective. Your own certificates of insurance all state however, that the certificate is issued “in accordance with all of the terms and conditions set forth in the master policy. The master policy may be amended by endorsement, canceled, or non renewed without notice to the insured/ certificate holder.” Call Vicencia & Buckley and demand you be sent a copy of the entire master policy which controls your store policy certificate, then take all the documents, including those attached to this press release, your own certificate of insurance, and that master policy (if you actually receive it) to your own independent insurance adjuster or your own attorney and ask for an analysis. You will be told that until PADI has paid $300,000 toward any claim you might have, Lexington Insurance Company has no legal responsibility to pay a claim to you. In short, if PADI cannot pay that amount, you have no insurance, which is the entire basis for the lawsuit.

I was also advised by PADI’s insurance lawyer that the final decision to pay my client’s claim was made on behalf of PADI by none other than Steve Vicencia, who was the insurance broker for not only my client, but for all of you who purchased PADI “sponsored” insurance. We believe, and allege in the lawsuit, that this hidden conflict of interest is completely inappropriate for insurance brokers under the law.

PADI’s press release asks you to contact PADI or Vicencia & Buckley Insurance if you have questions. Accordingly, we suggest you call PADI and ask the following questions:

1. Is it true PADI has to pay the first $300,000 of any property claim before the
insurance is effective?

2. Why were we never told this when we purchased the insurance?

3. Is it true that if PADI can’t pay the $300,000 we do not have insurance coverage
from Lexington?

4. If our own deductible is $1,000 on our property policy, why is there a $300,000
deductible on the policy?

5. If a thousand stores buy property insurance, the total premium collected is three million dollars, and if the actual policy cost is about $500,000, where did the other $2.5 million in premium money go?

You might ask Vicencia & Buckley Insurance the following questions:

1. Are you my insurance broker?

2. Do you have a fiduciary duty to protect my interest as my insurance broker?

3. Do you represent PADI in determining whether they should pay property claims out of the $300,000 deductible they are required to?

4. Isn’t this a conflict of interest with your fiduciary responsibility to me?

5. Why was I never told about this arrangement?

6. Is it even legal for you to act this way?

The responses should be interesting.

Rick

 

[ItsBruce]

Rick, welcome aboard the board.

 

[Troutmaster]

Did the PADI employees have their "Insurance Broker" specialty card? If not, big trouble.

 

[Rhone Man]

The biggest problem is that for must causes of action, there must be damage that flows naturally from the act. (It is called "proximately caused damage.") I do not see where there is proximately caused damage for various of the causes of action. For example, if I were to tell you that if you pay me $100, I will use my connections and professional courtesies to keep you from being eaten by a shark on your next dive and you pay me the $100 and do your next dive without being eaten by a shark, and you then sue me for misrepresenting my ability to keep you from being eaten by a shark, you will lose because you were not harmed.

One big exception to this: unjust enrichment claims.

Haven't read the pleadings or anything, but just thought I'd toss that in quickly.

 

[D_B]

Interesting

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