A federal judge has dismissed a lawsuit against United Property & Casualty Insurance Co. and its adjusters, a closely watched legal action that charged the insurer had violated anti-racketeering laws to systematically deny assignment-of-benefits claims from Hurricane Irma.
“We’re very happy with the decision. We think it’s the correct decision and we’re happy to put this case behind us,” said Michael Monteverde, attorney for United in the litigation.
The suit by SFR Services, a south Florida restoration firm, caught the attention of Florida insurers when it was filed in January, partly because it purported to include copies of text messages that showed UPC urging its adjusters to avoid estimating wind damages because the carrier planned to issue blanket denials of claims.
But U.S. District Judge William Jung found Wednesday that a 1945 federal law, the McCarran-Ferguson Act, leaves it strictly to states to regulate the business of insurance, and bars federal laws from interfering with state insurance laws. Florida statute requires a 60-day notice before a bad-faith lawsuit is launched against insurance companies. The lawsuit by SFR stood on the federal Racketeer Influenced and Corrupt Organizations, or RICO Act, which does not require that waiting period.
SFR, which is well-known to the Florida insurance industry because of its hundreds of AOB lawsuits in recent years, also failed to state its RICO claims with specificity or show how it was injured by UPC’s practices, the judge wrote in his order dismissing the suit.
“Because the McCarran-Ferguson Act preempts SFR’s RICO claim and because SFR fails to plead its RICO claim in accordance with the Federal Rules of Civil Procedure 9(b), the claim is dismissed with prejudice,” the order reads, meaning it cannot be filed again in federal court.
It’s uncertain if the contracting firm would fare better in state courts, since Florida has its own anti-racketeering statute. A similar suit brought by SFR, in fact, is now pending in Martin County. Attorneys for SFR could not be reached. The manager of the firm, Ricky McGraw, declined to comment.
The dismissal of the suit may come too late to help UPC financially. The insurer, which earlier this year had some 166,000 policies in force in Florida, may soon be deemed insolvent amid an estimated $1 billion in losses from Hurricane Ian. The Saint Petersburg-based carrier stopped writing new policies late last year and in June announced an orderly run-off of remaining policies.
“Now, with the losses from Ian, the company’s future is in peril and we think insolvency is likely,” Mark Friedlander, with the Insurance Information Institute, told Insurance Journal on Friday.
“There is a very high degree of uncertainty regarding the long-term economic implications of this event for our company and the entire industry,” United’s president and chief financial officer, Brad Martz, said in a statement Wednesday.
UPC also has some 200 lawsuits pending in state courts, filed by SFR Services. Some of those have been settled, which undermines SFR’s fraud claims against the carrier, UPC said in its motion to dismiss. But the suits could end up costing UPC significantly in litigation expenses.
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