Friday, January 25, 2008

Aiken v USAA: Rimkus Gets a Free Pass

Rimkus skates because they were not hired by the Aiken's according to a ruling yesterday in Aiken v USAA. I will certainly remember Judge Senter's ruling letting Rimkus off the hook next time one of my colleagues is hit with a malpractice suit by a third party over an audit report. On it's face this decision means its open season on us consumers by the hired guns of big insurance since they appear "not accountable" for their work product to third parties.


Rimkus and James W. Jordan had a contract with USAA to adjust the claim, notwith the Aikens. As a result, Rimkus did not have a duty under Mississippi law to deal fairly and in good faith with the Aikens, as does USAA. The insurance policy USAA provided the Aikens is considered a contract.

Even if the Aiken's prevail in their suit monetarily this will be a loss for the greater cause of fairness in claims adjusting so long dominated by claimant abuse since the McKinsey recommendations were adopted as the new gold standard by the insurance industry.

In any event today's Sun Herald story.

Judge dismisses Rimkus from USAA suit

Senter said there was no proof of gross negligence
By ANITA LEE

GULFPORT --Insufficient evidence of gross negligence and fraud led a judge to dismiss Rimkus Consulting Group Inc. and a company engineer from an insurance lawsuit after the policyholders' case was presented to a jury in U.S. District Court.

USAA Casualty Insurance Co. hired Rimkus to inspect the Pass Christian vacation home of David W. and Marilyn M. Aiken, which was destroyed by Hurricane Katrina. USAA is still presenting its arguments, and the case could go to the jury as early as today.

Rimkus and James W. Jordan had a contract with USAA to adjust the claim, not with the Aikens. As a result, Rimkus did not have a duty under Mississippi law to deal fairly and in good faith with the Aikens, as does USAA. The insurance policy USAA provided the Aikens is considered a contract.

The Aikens maintain USAA ordered an engineering report that would minimize wind damage to their property, insured for more than $680,000. USAA paid them $178,205 for wind damage. They received maximum benefits of $278,000 for damage from tidal surge under a federal flood insurance policy. USAA also adjusted the flood claim.

U.S. District Judge L.T. Senter Jr. noted the Aikens accepted the flood insurance money even though they contend a tornado destroyed their vacation home and boat house before Katrina moved ashore.

"At most, the evidence against Rimkus and Jordan would support no more than a finding of simple negligence in the investigation of the claim," Senter said in dismissing them from the case. "The testimony and evidence are not sufficient to support a finding that these defendants handled this matter in a grossly negligent or wanton matter with malice or with reckless disregard for the rights of the insureds."

A report Rimkus sent USAA in December 2005 concluded Katrina's wind or water was sufficient to destroy the house and boat house, saying the percentage of damage wind caused before the storm surge arrived could not be determined.

At USAA's request, Rimkus issued a supplemental report in March 2006 that detailed construction components wind could have destroyed before tidal surge destroyed the building superstructures. USAA based its payment to the Aikens on the March report. Rimkus and USAA witnesses said the supplemental report was meant to clarify how much the Aikens were owed, not to deny coverage.

8 comments:

Promise said...

Seems to me that this makes insurance companies more accountable. Could you explain a little more about the downside?

Sop811 said...

One of the ways insurance companies have tried to insulate themselves from bad faith has been to outsource engineering and claims adjusting.

If an engineering firm like Rimkus and Haag or an adjusting firm like EA Renfroe do the dirty work it provides a layer of separation. In the case of USAA it worked IMHO, as Senter's ruling means engineering firms have no duty to the claimant and thus are not accountable to the public.

Judge Senter is a respected jurist and I doubt he acted outside the law in his ruling. However, if CPAs were held to the same low standard as the law apparently holds engineers, we could put our good names on fraudulent reports and be oblivious to the consequences to third parties.

While I'm happy the law holds us to such a high standard in our conduct I am disturbed that other vocations that hold themselves out as professionals are content with such low legal standards relating to their conduct.

sop

PE said...

You couldn't be more incorrect about the rules and regulations regarding the practice of engineering in Mississippi. Engineers are held to very high standards. They have a duty to the public to perform their work truthfully and without bias. They also have rigid ethics set forth by the American Society of Engineers. The engineer in this matter complied with these laws and standards, and as a result - was dismissed from the trial with a directed verdict. The engineer's opinions regarding the failure of the structure were also accepted by the jury over that of the plaintiff expert.

Another thing: Please don't believe everything Anita Lee writes for the Sun Herald. I know for a fact that she sat behind the plaintiffs during the trial, and only spoke to them and their attorneys before publishing her stories. Her statements concerning the engineer were incorrect. One only has to compare her "stories" with the actual results of the trial to recognize her innaccuracies.

Sop811 said...

PE I'm not certain how "right" or "wrong" I am regarding third party responsibilities for an engineers work product but I welcome your comment and viewpoint.

Ms Lee's reporting of Judge Senter's logic in dismissing Rimkus prompted my observation. Any additional information you can add would be helpful. If you can show me specifically where my conclusions are wrong I will happily correct the record here.

Sop

PE said...

Thanks for the opportunity to explain. I appreciate that you seem willing to keep an open mind.

Ms. Lee's report took an excerpt from Judge Senter's ruling and presented it in a manner that suggests that engineers don't have to "deal fairly and in good faith" with the public. That is very misleading and inaccurate. What Judge Senter was referring to in his statement was the fact that Rimkus did not have a contract with the homeowner, while USAA did. As such, USAA was held to certain legal obligations with the Aikens that did not apply to Rimkus. This by no means was inferring that Rimkus could act in a manner that violates Mississippi Rules and Regulations and other ethic standards regarding the practice of engineering - including its duty to the public.

In earlier stories, Ms. Lee reported that the engineer violated company policies and revised reports. This was also inaccurate. These statements were simply the claims made by the plaintiff, with no opportunity given for the engineer to refute. Hopefully, everyone will realize that these claims were not true, as supported by the results of the trial.

Sop811 said...

You're welcome PE. For the most part we all have an open mind here - even Cowboy, which doesn't show through very well sometimes.

Two points:

The news story that ran on 1-15-08 contained this quote. "Structural engineer James W. Jordan reviewed several changes he made to the report completed by engineer Roverta Chapa, who actually inspected the property at Henderson Point on the Bay of St. Louis in Harrison County. Chapa and Jordan did not communicate before Jordan made the changes, which was against policy established by Jordan’s employer, Rimkus Consulting Group Inc."

The quote is unclear if Chapa or Jordan admitted this on the stand or if they admitted they did not communicate and Ms Lee inferred it was against corporate policy at Rimkus.

Second I think we agree on the logic behind Judge Senters ruling. As a CPA I come from a profession that is generally held liable for the results of my work product to third parties, even those I may not forsee. I'd much rather have the setup you engineers operate under.

In the end Judge Senter's rulings speak for themselves and he found no evidence in this case that Rimkus acted in bad faith or had legal liability to the Aikens. We accept his ruling.

Any color you can add to my observations is appreciated.

sop

PE said...

Thanks, SOP.

Ms. Lee left out that there was no official report completed by Mr. Chappa. Mr. Chappa was a field inspector who collected data and started a draft that was completed and issued by Mr. Jordan. Mr. Chappa was not a Mississippi licensed engineer, and could not complete and issue an engineering report. Mr. Jordan, on the other hand, was a licensed Mississippi engineer with the legal authority to seal and issue the completed report after making all decisions regarding technical content and engineering judgement. Ms. Lee also left out that Mr. Jordan inspected many properties along the Mississippi coast before Mr. Chappa performed his inspection at the Aiken site, and thus was very familiar with the general extent of damage in the area. Mr. Chappa was one of many inspectors that came to the area to assist with inspecting the thousands of damaged properties along the coast. There simply were too few licensed Mississippi structural engineers to personally inspect every single damaged structure without the assistance of trained inspectors. This is a common practice, particularly during catastrophes such as the 1994 Northridge earthquake and hurricane Katrina.

The plaintiff attorneys put up a lot of smoke and mirrors trying to portray a preliminary draft as a completed report. A draft, of course, is a continually changing document until it is completed. Since the issue concerned a draft not yet completed by the engineer of record, there were no violations of company policy, Mississippi rules and regulations, and national engineering ethics.

Ms. Lee wrote a mixture of the plaintiff's claims and a portion of the trial testimony. She presented her information in such a manner that misleads the reader to think that the Mr. Chappa issued a report, and that Mr. Jordan revised it. She goes on to state that Mr. Jordan reviewed these changes in his testimony. The changes reviewed in his testimony were simply minor edits that were made to the draft before the report was completed.

I'm sorry for the lengthy explanation, but it really is as simple as I've stated. I really appreciate the opportunity to hopefully wipe some of the mud off of the faces of the engineers targeted by Ms. Lee. I don't think the Sun Herald would provide the opportunity that your website offers. I recommend to everyone that they put more credence in the AP stories rather than Ms. Lee's, at least with regard to the Aiken trial. Thanks again!

russell1200 said...

On the contracting side it works the same way. Sub-contractors cannot sue each other because they don't have a contract with each other. If the electrician gets mad at the plumbers they have to sue the general contractor. The general contractor would then have the right to sue the plumber.

That is what makes multi-prime contracts such mayhem. Since the "general contractor" is not in charge, the sub-contractors are generally allowed to sue each other, and often due.