By NEIL HARTNELL
Tribune Business Editor
Disputes over Hurricane Matthew-related claims are hitting the Supreme Court, with one Lyford Cay property owner alleging his insurer and broker are "stalling" to avoid a $1.6 million payout.
The corporate owner of Jacaranda, understood to be controlled by a wealthy Kentucky resident, is battling Summit Insurance Company and Insurance Management (Bahamas) over both the value of construction repairs and issues related to the insurance policy contract.
Bolingbroke Ltd, in its June 22, 2017, statement of claim is alleging that Summit and Insurance Management - respectively the policy's underwriter and agent/broker - are disputing the repair costs and raising concerns of under-insurance as "an excuse not to pay out on a justified claim".
The Jacaranda owner is also claiming that the two companies "failed to disclose material facts" when it purchased its insurance policy, namely that Summit and Insurance Management are affiliated companies because they share the same principal shareholder in Cedric Saunders.
Its statement of claim also alleges that Summit and Insurance Management failed to ensure its owners "fully understood the deductible clause" in the policy, and that the 10 per cent deductible was calculated on the basis of the sum assured rather than the value of the damage.
Both Timothy Ingraham, Summit's president, and Insurance Management executives, declined to comment on Bolingbroke Ltd's legal filings on the grounds that the case was now before the court.
However, Tribune Business understands that both companies vehemently deny Bolingbroke Ltd's allegations, are are prepared to vigorously defend their position.
While not commenting on the specifics of the 'Jacaranda' matter, Mr Ingraham emphasised to Tribune Business: "We believe in being very fair to our clients. If they have a loss and have purchased protection, we're not in the business of being unfair to them. We want them to be clients for life."
Insurance industry sources told Tribune Business that the deductible issue appeared to be the weakest part of Bolingbroke's claim, but added that the case raised several issues that were worthy of the Supreme Court's determination.
They said there was still uncertainty over how far brokers/agents had to go in ensuring clients understood the policy contract, while the issue of 'tied' carriers - where underwriters were partially or wholly-owned by agents - had been "a huge bone of contention over the years".
"It's quite an interesting case," one source, speaking on condition of anonymity, said. "As much as we don't like litigation, the courts can set a precedent and clarify matters.
"It identifies one of the challenges we have with insurance contracts. Clients sign that they're in receipt and understanding of the contract, but how far do you go in ensuring the person understands it from a legal perspective?"
The Bahamian insurance industry has evolved as an agent/broker driven market, with many of the local property and casualty underwriters created as vehicles for them to place business with.
Just as Insurance Management places much of its general insurance business with Summit, so does J. S. Johnson through Insurance Company of the Bahamas (ICB). RoyalStar Assurance is majority owned by Sunshine Holdings and Star General, both insurance agents/brokers, while Bahamas First has expanded through acquiring agencies.
Another industry contact, speaking on condition of anonymity, said the ties and common ownerships between agents/brokers and underwriters created the perception of "conflict" as to whose interests were paramount - the client's or the tied underwriter's - when a claim was made.
They suggested that other Caribbean countries had prohibited brokers/agents writing policies for underwriters where there were common shareholding interests in a bid to prevent 'conflict of interest' issues arising.
Tribune Business understands that Summit and Insurance Management view Bolingbroke/Jacaranda's raising of this issue as "a red herring", and part of a strategy to "throw the kitchen sink" at them in a bid to force them into an unfavourable settlement.
Bolingbroke Ltd is alleging that it would "not have proposed for or subscribed to the policy terms" it ultimately took out had it known the common shareholdings and ties between Insurance Management and Summit.
It is claiming that Neil Cadman, an Insurance Management director, did not disclose these issues when advising Jacaranda to place its property insurance business with Summit.
"Mr Cadman did not disclose these fundamental and crucial facts that Mr Saunders is, and was, at all material times the sole shareholder of [Insurance Management, and] a principal shareholder of Summit," Bolingbroke's statement of claim alleges.
"Whilst the plaintiff had the option of placing their business with other insurers, they relied on Mr Cadman's representations that Summit Insurance was the best choice for their insurance needs."
Bolingbroke reiterated that had the links been disclosed, "it would probably not have entered into the policy or, at the very least, it would have caused the plaintiff to critically evaluate what was being offered and the terms of that offer".
Tribune Business understands that Summit and Insurance Management believe Bolingbroke Ltd, and its principals, are being "difficult" and "unreasonable" over the Matthew claim despite their efforts to settle the matter.
This newspaper was told that the two insurance companies had offered to resolve the dispute over the construction/repair costs via arbitration, believing this was a cheaper and speedier mechanism for dispute resolution, only for Bolingbroke to reject this and head straight for the courts.
Mr Cadman and Nick Croan, an insurance adjuster, met Bolingbroke's representatives, including architect Kevin Sweeting and Paul Fox, from Specialty Management Group (SMG), at Jacaranda some four days after Matthew's passage to assess the damage.
"It was noted by Messrs Croan and Cadman that Jacaranda's damage was, in their professional opinion, the worst they had ever seen," Bolingbroke Ltd alleged. "The insured has never seen a copy of the report submitted by Mr Croan, but was left in no doubt that his view was that this was a serious and large claim."
It then alleged that Summit, Insurance Management and their agents "failed to carry out a proper and thorough assessment" of Jacaranda's damage, with assessments carried out midway through the property's reconstruction.
Bolingbroke claimed that Veritas Consultants assessed Jacaranda when repairs were only 70-80 per cent complete, while the failure to provide it with SMG's quotes and invoices made it "impossible for them to give a proper quote on the construction costs".
It also alleged that DHP Associates, based at Sandyport, assessed Jacaranda's construction and valuation mid-project, "but were never engaged to do a full and detailed analysis of the construction:.
Bolingbroke said itself and the two insurance companies eventually agreed to request a full construction cost analysis from DHP, but it had yet to see this.
It added that it had paid $1.61 million in hurricane reconstruction expenses to-date from its own pocket, plus funded DHP's report due to claims of under-insurance, but had received nothing from Summit.
"It seems to the insured that the insurers are seeking to delay this process in order to continue searching for an excuse not to pay out on a justified claim," Bolingbroke alleged.
"In the first instance, the insurer claimed that the property was underinsured. When the insured disproved that allegation, at its own expense, which was accepted by the insurers, the insurer made the allegation that the construction costs were not accurate.
"The insured have complied with every respect made by the insurers, but have been meet with resistance and delay tactics at every stage of the process. It is clear that the defendants are stalling in order to avoid paying the full and true amount due to the plaintiff under the policy."
Summit and Insurance Management are understood to dispute the reconstruction costs. The two insurers believe they are being "very reasonable" in the payout sum being offered, but feel Jacaranda/Bolingbroke are consistently increasing the claim value without any supporting evidence.
Both companies, together with the rest of the insurance industry, feel they cannot give in to excessive claims - not least because it would potentially suck money away from other Matthew-affected policyholders.
Summit and Insurance Management also feel the 10 per cent deductible, and its calculation as a percentage of the sum assured, was properly explained to Bolingbroke prior to it taking out the insurance contract - which had already been renewed once.