PADI getting sued over Insurance Program

[ItsBruce]

Hey ... you're not running different theories by us at Scuba Board to see what any "12" of us might think, are you?

That would really SUCK .. especially after you gave me a "thumbs up" from an earlier post

1. Redacted does mean that it has been blanked out of the policy.

2. The redacted section has to do with the rate renewal, not the SIR.

3. Brokers don’t get to modify the policy. That is done by the insurance company’s own in-house personnel, usually in the underwriting department. While hacked up endorsements can cause big problems for the insurance company, since they are usually “one-off,” it is not as serious a problem as when it is in every policy the company issues.

4. Sorry, but it does not surprise me that PADI would be sending out reminders to shops about the various policy exclusions. And, that is not because I think PADI is in the business of insurance. Rather, given PADI’s status as the “umbrella organization” for dive shops, that would be the kind of thing it might send out. I send newsletters to my clients, former clients and those who I’d like to have as clients, telling them about developments in the law. That is just a “customer service” I provide. It does not make me the Legislature or the Court.

5. As far as auto insurance, it is less expensive to have a young driver as an insured on the parents’ policy than to have a separate policy, even with the exact same coverages.

6. I’m well aware of the theory that PADI put 5,000 or 6,000 shops on its policy as certificate holders and of the allegation that it made a lot of money doing so. I’m still not impressed.

7. I still have no dog in the fight. I never have had a dog in the fight. I do not expect to have a dog in the fight. (The closest I have been to having a dog in the fight is that Richard once sent me a very cool t-shirt that said something about divelaw.com.) I’m not running theories by anyone. I have no theories. I have no wagers. All I have is analysis.

 

[PuMpUi]

Cool is as Cool does.


Always nice exchanging ideas and "bantering" back and forth with you ...

 

[Ayisha]

Can I assume that those shops will have a legitimate loss and damages due to actions by PADI, and this will open a new can of worms that might devastate PADI?

For some reason I think PADI is being maneuvered and set up for a future case.

My reaction is to say "no." First, if the policies are rescinded, then it is as if they never existed and a shop would have no basis for complaining. (It would be as if PADI had offered the insurance program to a shop, the shop declined, and the shop then had a loss.) Second, the law will not let a shop rescind the policy and then complain that it rescinded.

Bruce, I think the concern about the policies being rescinded is about OTHER shops not involved in the suit who may have to return any payment received on claims and then may have legitimate losses and damages as a result. Rescinding the policies applies to ALL policy holders, not just the plaintiffs, right?

 

[ItsBruce]

Bruce, I think the concern about the policies being rescinded is about OTHER shops not involved in the suit who may have to return any payment received on claims and then may have legitimate losses and damages as a result. Rescinding the policies applies to ALL policy holders, not just the plaintiffs, right?

I realize that.

A shop that is not involved in the suit is not involved in the suit. As such (1) its policy would not be rescinded because of the suit, (2) it would not get its premium back, and (3) it would not need to return any benefits received under the policy. As such, it would not have been injured. A shop would need to "opt out" of the class in order to not be involved in the suit.

As to shops that don't opt out, if the policies are rescinded, they are rescinded and it is as if they never existed. One cannot complain that one was defrauded into buying a policy when one has not bought the policy. Nor can one complain that they were not paid enough or paid quickly enough.

"You can't give your cake back and eat it too." -- Bruce

(BTW: Thanks for using my name, i.e. "Bruce," rather than my username.)

 

[krbnlaw]

The damages sought by the plaintiff are baffling to me, especially given that it appears this plaintiff actually received a payment (I think $88,000) for a claim under this policy in connection with a fire. I would think they would avoid recission of the contract, but instead ask for a return of a percentage of the premiums paid. Arguably, insurance provided by an unlicensed company that does not maintain reserves to back potential claims is much riskier and worth less than a policy provided by a properly licensed insurance company. If PADI misrepresented the coverage to the holders, I would think the the holders would want money damages to compensate them for the additional risk they took on but were not aware of. I'm not an insurance expert and not familiar with CA law, so not sure if this type of remedy would be available in this case. I just don't understand why a plaintiff would hire 2 law firms and file a complaint asking the court to grant them a remedy that results in a loss for the plaintiff. Oh yeah, they'll also need to pay the legal fees unless this is included in the award. I'm missing something here.

 

[Ayisha]

Thank you for the explanation, Bruce. So a shop that holds the policy is automatically involved in the lawsuit unless it opts out. Any shop that is involved should get good legal advice, otherwise they may not know the ramifications of not opting out or what would be best for them. OTOH, I can see that PADI could get taken advantage of with shops that received payments opting out while shops that did not make any claims remain in the suit and get their premiums back. It seems to be a win-win for the dive shops.

Yet it still makes no sense regarding the plaintiff... at least on the surface...

 

[PuMpUi]

The damages sought by the plaintiff are ... for a claim under this policy in connection with a fire. Arguably, insurance provided by an unlicensed company that does not maintain reserves to back potential claims is much riskier ... than a policy provided by a properly licensed insurance company. If PADI misrepresented the coverage to the holders, I would think the the holders would want money damages to compensate them for the additional risk they took on but were not aware of. Oh yeah, they'll also need to pay the legal fees unless this is included in the award. I'm missing something here.[/QUOTE]


Perhaps you are missing the "details" between the Plaintiff and the Attorneys?

Maybe the Attorneys are doing this Action as "Pro Bono" (without charge) as a Community Service to the Dive Community in an attempt to clean up the Industry?

After all ... LAWYERS have "SUCH" a bad rep, overall ... present company excluded, of course ?!?!?! __________________

 

[theduckguru]

If the policy is rescinded, why would Kauai Scuba need to return a dime for the insurance claim? It sounds to me that they did not receive any funds from the insurance policy they bought and that's the issue - no insurance contract with PADI and PADI acting as a unlicensed insurance company skimming the top of paid premiums.

 

[ItsBruce]

If the particular lawyers are not expecting to be paid, I'd be surprised beyond words. That is especially true since the whole deal behind a class action is that the attorneys bring it because they get such a big recovery. There are two chances the lawyers are not looking to get paid out of the settlement proceeds: (1) "slim", and (2) "fat."

PADI is not getting taken advantage of by any stretch of the imagination, except to the extent the whole thing is a shake down. If PADI wins, the shops get nothing. If PADI loses, then it is only fair that shops that want to rescind can rescind and those that don't don't.

I, of course, expect that PADI is going to win this, perhaps on an early motion to dismiss. Having read the policies, I do not see PADI is acting as an insurer, no mater how hard those with either an interest in the outcome of the suit or who don't like PADI argue otherwise. Sorry. Letting someone be an insured under your policy is not acting as an insurer, even if they pay you to let them do so and even if they pay the deductible. I just don't see it. Sorry. And, no one has pointed to any case or statutory or regulatory law to the contrary. Please note, I do not make the law on this.

And, as far as the fraud, misrepresentation and other claims, I still do not see damages to any shop flowing from any alleged misrepresentations. No one seems to be able to allege that they had a claim that was not paid because of the deductible or the limits.

The coverage the shops may have gotten may not have been as good as what they would have gotten under a policy under which they were the only insured and under which there was no deductible. However, a shop would have to prove that that it would have done so had it known the truth and that what it paid was not commensurate with what it got. (How do prices on non-PADI policies compare?)

A couple of other thoughts:

1. For any shop that got a copy of the actual policy, the game is probably over. The policy discloses exactly what it is providing and would prevent anyone from relying on oral statements to the contrary. (Did I mention that to establish fraud or misrepresentation or concealment, a plaintiff must prove it justifiably relied on a false statement and would not have done what it did in the absence of it?) In California, one of the cases that would act as precedent is Hadland v. NN Investor's Life Ins. Co. (1994) 24 Cal.App.4th 1578. There, the court held that a policyholder who receives and accepts his policy without objection is bound by its terms and cannot complain he did not read or know the terms. It held that as a result, he cannot have justifiably relied on representations about the policy's coverages and he cannot sue for fraud.

2. Shops that did not get a copy of the actual policy, but rather got a certificate of some sort, were probably put on notice that no policy was issued to them, but rather that they were just being added to PADI's policy. For the same reason, such shops probably can't sustain a claim for fraud, etc.

 

[ItsBruce]

If the policy is rescinded, why would Kauai Scuba need to return a dime for the insurance claim? It sounds to me that they did not receive any funds from the insurance policy they bought and that's the issue - no insurance contract with PADI and PADI acting as a unlicensed insurance company skimming the top of paid premiums.

1. I'm not quite sure what you are trying to say here.

2. I understand, and think it is actually alleged, that Kauai Scuba received $88,000 on its claim. It received that because there was a policy under which it was an insured.

3. At least according to the policies I read, I don't see PADI is acting as an insurance company. And, I don't see PADI is getting anything amounting to a premium. What I saw in the policies is that shops can enter into a deal with PADI where PADI makes the a "certificate holder" and Lexington has agreed that any certificate holder is insured under the policy Lexington issued to PADI.

It looks to me sort of like when you go to work for an employer and get health insurance and have some money taken out of your paycheck for it. You become a certificate holder under the employer's master policy. Does anyone feel that their employer has become an insurer? Does anyone feel their employer is receiving a premium?