What is a Reciprocal Insurance Exchange?

Written by Andy Webb, Esq. Edited by Gary Reinhardt, Esq. A reciprocal insurance exchange is “an unincorporated association in which members (as individuals, partnerships, trustees, or corporations) exchange contracts and pay premiums through an attorney-in-fact for the insurance of each other.”  Reciprocal Exchange: Legal Definition, Merriam-Webster.com, https://www.merriam-webster.com/legal/reciprocal%20 exchange (last visited March 6, 2019).  Historically, insurance exchanges were formed by individuals or corporations engaged in a similar line of business who together undertook to indemnify one another from certain kinds of risks by a mutual exchange of insurance contracts.  See Lee v. Interinsurance Exchange, 50 Cal. App. 4th 694.   Often times insurance exchanges were started to avoid questionable risk pools.  For example, USAA (a reciprocal insurance exchange with a military focus and over ten million customers) was founded by military officers who believed they were better drivers than average civilians.  See Andrew Verstein, Enterprise Without Entities, 116 Mich. L. Rev. 247, 267 (2017) (citing Paul T. Ringenbach, USAA: A Tradition of Service 1922-1997, at 20).  Today, policyholders in a reciprocal insurance exchange—often known as “subscribers”—act through a common attorney-in-fact and are simultaneously both insurers and insureds.  This method of providing insurance is different from mutual insurance companies because insurance exchanges do not have a corporate existence; instead, they are simply an unincorporated association of individuals who swap potential liabilities between themselves.  43 Am. Jur. 2d Insurance § 72 (2016). Reciprocal Insurance Exchanges’ Unique Legal Position Due to their unique structure, certain distinctive legal questions arise in litigation involving reciprocal insurance exchanges.  One of the most relevant of these questions is where are reciprocal exchanges “citizens” for the purpose of diversity...

Winning Zero: Relating Damages to Accident is Required Under Virginia Law

Written by Lee Hoyle Edited by Brian A. Cafritz All tort cases, at the broadest level, consist of two elements: liability and damages. If the defendant prevails on liability, the plaintiff necessarily recovers nothing. However, the converse is not always true. The Virginia Supreme Court has reaffirmed twice in the past two years that a plaintiff who prevails on liability is not necessarily entitled to recover any damages. As long as the evidence supports such conclusion, the jury is free to decide that the plaintiff was not injured and award no damages. In Gilliam v. Immel, 293 Va. 18 (2017), the plaintiff was the driver of a vehicle struck from behind by the defendant’s vehicle. The plaintiff went to the emergency room complaining of neck and low back pain. After the emergency room, however, her treatment focused on shoulder pain, eventually requiring surgery. She presented testimony from her shoulder surgeon, but did not provide other testimony on the reasonability or necessity of her medical treatment and bills. The defendant presented expert testimony denying that her shoulder injuries were related to the accident. Neither party presented evidence directly on the causation of the plaintiff’s emergency room treatment. The jury returned a verdict finding the defendant liable but awarding no damages. Shumate v. Mitchell presented a similar, but slightly different scenario. ___ Va. ___, 822 S.E.2d 9 (2018). Like Gilliam, the plaintiff in Shumate was the driver of the front car in a rear-end accident. The plaintiff in Shumate, however, had a long and ongoing history of treatment for pain similar to what she claimed in the accident. She went to...

Not Your Business: Analyzing the Statutory Employer Test in Virginia

Written by Joseph Smith, Esq. Edited by Rachel Riordan, Esq. What remedies does a claimant have when he is injured while working for an uninsured contractor? Can he assert his claim against the owner of the construction project as his statutory employer? Does it matter if the owner has no involvement with the construction other than financing it? In Jeffreys v. the Uninsured Employer’s Fund, et. al., Record No. 171467 (Feb. 14, 2019), the Supreme Court of Virginia (the “Court”) recently considered the issue of whether a historical society could be a statutory employer under the Act. In Jeffreys, the Harvey School Historical Society (the “Historical Society”), founded by California resident Annie Mosby, sought to purchase a school building in Pittsylvania County to restore it, maintain it, and preserve it as a historical site. Id. at 2. The Historical Society became an auxiliary of the Mount Lebanon Missionary Baptist Church (the “Church”) to obtain a tax-exempt status. Id. The Church allowed the Historical Society to meet on the premises but otherwise provided no financial support to the Historical Society. Id. Mosby hired William Johnson, an unlicensed contractor, to plan and perform the renovation. Id. Mosby was present only briefly at the beginning of the project and she had no construction experience, nor did she exercise control over Johnson or the work being performed. Id. Johnson initially only worked with one other individual on the project, but later requested permission to hire the Claimant as well. Id. at 2-3. Johnson was considered the “boss” on the job, and he exclusively managed the Claimant’s work. Id. at 3. While working on...

Removal to Federal Court: When Does the Clock Really Start Ticking in Virginia?

Written by Henry U. Moore, Esq. Edited by Bill Pfund, Esq. Removal of a lawsuit from state court to federal court can often be an advantageous strategy move by a defendant in Virginia. This is primarily because federal courts are far more willing than Virginia state courts to grant summary judgment to a defendant when a plaintiff has failed to present a viable case for trial. Federal courts also move cases along more quickly than state courts, as exemplified by the nickname of the U.S. District Court for the Eastern District of Virginia, often referred to as the “Rocket Docket.” But there are limits to how, and when, a defendant may remove a case to federal court. A case is removable to federal court only if (1) it presents a question of federal statutory or constitutional law (“federal question jurisdiction”) or (2) it involves adverse parties which are citizens of different states and an amount in controversy over $75,000 (“diversity jurisdiction”). If the initial complaint filed by the plaintiff in state court presents one of the above grounds for removal, a defendant has 30 days from receipt of the complaint (by service or otherwise) to remove the case to federal court. 28 U.S. Code § 1446(b)(1). But what if the plaintiff’s initial complaint does not provide a basis for removal – can the case ever be removed to federal court? 28 USCS § 1446(b)(3) specifies that “if the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant…of a copy of an amended pleading, motion, order...

Rate Evasion: The Steps to Take When Trying to Prove It

Written by Gary Reinhardt, Esq. Editors Note: This article first appeared in the Winter 2019 Edition of SIU Today Rate evasion refers to when an individual materially misrepresents information on an insurance application.  The applicant evades a higher premium, or obtains insurance she may not be eligible for, by submitting or omitting material information on the insurance application. Rate Evasion can lead to an insurer voiding the policy ab initio, or from inception.  Many in the industry also refer to this as “rescission.”   When an insurer voids/rescinds a policy, it does so on the basis of fraud in the inducement, essentially claiming that the insurer would never have contracted with the applicant had the applicant told the truth.  The remedy is to put each party back to where they were prior to the contract.  The insurer refunds the premium paid and treats the policy as if it never existed. Voiding/rescinding the policy differs from a claim denial.  An insurer can void a policy, often resulting in non-coverage for a valid claim one that would ordinarily be covered by the terms and conditions of the policy.  Voiding also allows the insurer to escape liability from any prior non-disclosed claims and from any claim that might arise subsequently. Denying coverage impacts only the particular claim at issue.  The policy remains in force and subject to providing coverage for any prior claims and any that may arise.  This is important because carriers may intend to cancel a policy rather than voiding a policy.  This keeps the carrier exposed while it completes the statutory cancellation procedures and timeframes. Rate evasion indicators, or “Red...

How the Changing Mindset by Millennials Affects Your Jury

Written by Jessica Relyea, Esq. Edited by Brian A. Cafritz, Esq. If you are from the millennial generation, the chances are you have been derided by a family member or neighbor as being “entitled.”  If you are from an older generation, you may have even used that phrase to describe a younger employee at your office.  Older generations being annoyed or skeptical of younger generations is nothing new.  X-ers should recall being called “slackers” and Baby Boomers were defined as “hippies.”  The challenge for lawyers, adjusters and risk managers is that millennials are now the most populous generation in the United States.  Press Release, U.S. Census Bureau, and Millennials Outnumber Baby Boomers and are Far More Diverse, Census Bureau Reports (June 25, 2015). This means that millennials make up a larger percentage of your customers, employees, and yes, even jury pools, than any other generation.  Knowing that, it is important to see millennials beyond the stereotypes and determine how they are going to affect the outcome of your case. There is a certain amount of disagreement in defining the generation, but a 2019 Pew Research Center report defines millennials as those born between 1981 and 1996.  Domock, Michael, Defining generations: Where Millennials end and Generation Z begins, Pew Research Center, https://pewrsr.ch/2szqtJz, (January 17, 2019).  This means that in 2019, millennials will turn between the ages of 23 to 38.  The Pew Research Center decided on these parameters in part because the generation has to be old enough to comprehend the 9/11 terrorist attacks, which is the most significant historical event that defines them, and because they entered the workforce...