Claims And Issues

Citizens United Rejected!

    In Citizens United Reciprocal Exchange v. New Jersey Back Institute, 2011 WL 1392602 (N.J. Super. Ct. App. Div. January 30, 2012) (New Jersey State Courts hyperlink not located for this unreported decision), Citizens United's appeal was rejected.  Citizens United appealed an umpire's award of PIP benefits after arbitration.  Its appeal was rejected in this case because it did not show the kind of "rare circumstances" which qualify in New Jersey law for appellate review of an umpire's arbitration award.  Id. at unnumbered page, final paragraph before section "III" of opinion.

    Although Citizens United lost the war, it did not lose a battle in this case.  The Law Division was upheld by the Appellate Division in a ruling denying reimbursement of attorney's fees to the Back Institute.  Id., first paragraph following section "III" heading on unnumbered page in opinion.

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Settling Out-of-Network Health Payments: It'll Make You Weep.

    In 2009, the New York Attorney General began settling claims with Health Insurance Companies in New York, that they low-balled their out-of-network payments based on habitually understated "usual and customary" rates in the locality.  See generally Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 9:30, "'Out of network' Healthcare Calculations" (3d ed. West Publishing 2011).

    As a part of the settlements, the settling Health Insurance Companies agreed to finance a more reality-based database for out-of-network payments they would make in New York.  They did not, however, agree to use the reality-based database.  Nina Bernstein, "Insurers Alter Cost Formula; Patients Pay" p. A1, col. 1 (New York Times Nat'l ed., Tuesday, April 24, 2012).

    Instead, by 2012 the same Health Insurance Companies were basing their out-of-network payments on a model that has reduced even the meager amounts they were paying before they agreed not to follow the "usual and customary" rates or "UCR" model.  Id.

    The payment model currently favored by the Health Insurance Companies for out-of-network payments in New York is based on a percentage of rates paid by Medicare.  However, Medicare pays principally based on rates for primary medical treatment whereas patients-Policyholders seeking out-of-network health care are seeking treatment by and large from specialists.  Id.

     You have got to wonder.  Does anyone paid by the Government know how to negotiate a settlement and, if they do, do they know anything about how Health Insurance Companies charge Premiums?

The author is Co-Chair of the Health, Life and Disability Insurance Subcommittee of the American Bar Association's Insurance Coverage Litigation Committee.

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The Uneven Hand of Attorney's Fees.

    Insurance companies often face attorney's fees claims which are submitted with breathtaking rates.  Sometimes Judges acquiesce in high attorney's hourly rates.  From the insurance companies' perspective, it sometimes seems as though they are made to pay attorney's fee rates simply because they can appropriate the money to pay.  See the previous posts in the category of "Attorney's Fees," on this very blog.

    The Republican leadership of the Florida Senate is paying a Miami lawyer $695.00 an hour.  The Florida Senate retained his legal services to represent the Florida Senate's side of the argument in a legislative redistricting-gerrymandering contest.  Mary Ellen Klas, "Florida Supreme Court Justices Raise Doubts About Arguments Against Senate's Redrawn Map" (Tampa Bay Times Online, posted Friday, April 20, 2012).

    Attorney's fee bills.  What are you gonna do?

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Crop Insurance and Federally Undefined "Material" Misrepresentations in the Application.

   Crop Insurance is flying under the radar of most Insurance Coverage practitioners.  It is reportedly a highly lucrative business, heavily subsidized by the Federal Government.  See Ron Nixon, "Report Says a Crop Subsidy Cap Could Save Billions" p. A15, col. 3 (New York Times Nat'l ed., Thursday, April 12, 2012).

   A mom and dad tried to set their son up with a Crop Insurance Policy, but the attempt was not successful when the Crop Policy was rescinded by a Federal Court.  Among other evidence in the record of that case, the Federal Court pointed out that apparently the son did not invest very much in the crop which he was applying to insure before he made a claim for a big loss on it.  Skymont Farms v. Federal Crop Insurance Corp., 2012 WL 1193407 *1 (E.D. Tenn. April 10, 2012), Download Skymont Farms v. Federal Crop Ins. Corp. (E.D. Tenn. Case No. 4.09cv65, Memorandum and Order of Lee, U.S.M.J.) PUBLIC ACCESS.

   However, the Federal Court faced the task of defining what a "material" misrepresentation would be in an application for Crop Insurance, because Congress had not defined the term.  Without a Federal definition, the Federal Court turned to State Insurance Law for a definition, held that the application for Crop Insurance at bar met the definition because the son just did not display an insurable interest for the Crop Insurance he was applying for, and ordered that the Crop Insurance Policy was rescinded -- without payment of the son's claim, of course.  Id. at *8 - *10.

   This decision is of interest at the present time for reasons beyond Crop Insurance and that extend to Health Insurance.  The Patient Protection and Affordable Care Act, or "ACA," one provision of which is currently under constitutional review by the U.S. Supreme Court, contains a provision governing Rescission of Health Insurance policies and plans subject to the ACA.  It does not contain any definition of what constitutes a "material" misrepresentation sufficient for Rescission of such Health Coverage.

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Florida Homeowners Insurance Premium Catastrophe: Imaginative Premium Base Spiked Premiums.

   Florida Homeowners are facing a Catastrophe without a named storm.  Premiums for Homeowners Insurance have spiked sharply, even skyrocketed, even over the Premiums that were charge for the same Homeowners Insurance last year.

 One reason for higher Homeowners Premiums is the higher cost of Reinsurance for Homeowners Insurers.  See Scott Maxwell, "Taking Names / Why Homeowner Insurance Rates Are Skyrocketing" p. B1, col. 1 (Orlando Sentinel, Sunday April 15, 2012).  But they are not just passing along costs as the market would ordinarily dictate.

 Instead they are pushing a false model, some say, which is based not on evidence but on opinions about how major storms -- if they strike Florida -- might sometimes result in Property Damage claims.  See "Current Computer Models Predict Premium Increases, Not Hurricanes," posted here on December 7, 2011 with links to prior posts.

 Computer models matter.  That is why many Homeowner's Insurance Companies are putting money in the bank, and why many Homeowners are not.

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Government's Role in Health Insurance: Two Questions Answer Legitimate Concerns.

"You can get health insurance."  Associate Justice Samuel Alito, during the recently held oral arguments at the Supreme Court in the Patients Protection and Affordable Care Act ("ACA") Case.

    Maybe you can get health insurance.  Others cannot get health insurance.  Not because they do not want it.  But because they cannot get it even though they need it.

   There is a big difference.

   A Constitution-size, Insurance Coverage-size difference.

          During the course of the recent oral arguments at the Supreme Court over the constitutionality of the so-called Health-Insurance-purchasing-mandate of the ACA, a recurring interrogatory was if the Federal Government can require people to purchase Health Insurance or be penalized with a monetary penalty if they do not, what else can the Federal Government require people to do if it can require that?  And like unto it:  What then are the boundaries of this power, what are the limits if any on it?

        A business owner named Donna Dubinsky gave a complete answer to these questions with a compelling two-part test:

   The government muffed its response.  To me, the answer is obvious.  There are two simple limiting conditions, both of which must be present:  (1) it must be a service or product that everybody must have at some point in their lives and (2) the market for that service or product does not function, meaning that sellers turn away buyers.  In other words, you need something, but you may not be able to buy it.

Donna Dubinsky, "What Makes Health Care Different" (Washington Post Online, published Friday, April 6, 2012).

         Phrasing the required answers to the two parts of this test in slightly different words, (1) people need it and (2) regardless of how much if anything they are willing to pay for it, someone else, not them, controls whether they get it or not.

        Clearly the control of someone else is a power which ought to be exercised only in Good Faith, dealing fairly with the people who need "it," whatever "it" is, including Health Insurance.  The reluctance of many if any Courts to impose an actionable duty of Good Faith and Fair Dealing on the Insurance application process reflects the difficulty in relying on common law or even equitable solutions as alternatives to the problem.

 A related post on this subject was published on Insurance Claims Bad Faith Law Blog on Tuesday, April 10, 2012.

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Coverage of Health Care in U.S. Supreme Court? Why Not?

    Coverage allowed by the U.S. Supreme Court of its oral arguments recently came into focus for me, and probably for you.

    Specifically, the recent three years (or so it seemed to some) of oral arguments on  the status of the Patients Protection and Affordable Care Act, or "Health Care," was covered by:

• Transcripts authorized by the Court.
• Print media permitted by the Court.
• Sketch artists listed by the Court.
• Audio broadcast live from the Court.

    So why not video broadcasting live images of the Justices and the lawyers, in real time, doing what they really do, acting how they really act?  Brian Lamb, a founder and the long-time CEO of C-Span, recently made exactly this compelling argument -- on video -- which is accessible here.

    Coverage.  It's an issue pending in the Supreme Court. 

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Loan Servicer Invokes Union Clause to Receive Fire Loss Payment.

    Rescission of an Insurance Policy should leave no policy in its wake at all, is the usual understanding of Rescission.  A Federal Court in Indiana recently held that this is not the case where an innocent mortgagee had a right to be paid for a loss covered under the rescinded policy.

    In Ocwen Loan Servicing, LLC v. Nationwide Mutual Fire Insurance Co.,  2012 WL 1067854 (S.D. Ind. March 29, 2012), Download Ocwen Loan Servicing,LLC v. Nationwide Mut. Fire Ins. Co. (S.D. Ind. Case No. 1.07cv01449, Order on Pending Motions Filed March 29, 2012) PUBLIC ACCESS, Mr. and Mrs. Allen applied for two Homeowner's Policies with overlapping policy periods.  The relevant Homeowner's Policy was issued by American Family.  It contained a "standard" or "union mortgage clause" which provided for payment to the mortgagee regardless of the conduct of the insured(s).

    The Allens claimed a fire loss.  American investigated and determined that the Allens' application did not accurately reveal their prior fire loss history.  American unilaterally rescinded its policy on the ground that there was a material misrepresentation in the application.  American refused to pay either the Allens or Ocwen, a Mortgage Servicer representing the mortgagee at the time of the fire loss.

    The Federal Court agreed with American that it had properly and unilaterally rescinded all of its Coverage as to Mr. and Mrs. Allen.  However, the Court also held that, under Indiana law, an innocent mortgagee was entitled to recover under American's policy terms even if the insurance contract was rescinded as to the named Policyholders.  Id. at *7.

    "Asymmetry of information" is a phrase in vogue.  It is often used to describe the information about claims that is ordinarily vastly more accessible to an Insurance Company, than to a Policyholder.  In this case, however, it was the applicants for American's Homeowner's Insurance Policy who were addressed with this phrase, not the Insurance Company.  In this case, the Court upheld American's unilateral rescission on the ground of material misrepresentation by describing the "asymmetry of information" available to the applicants and not available to American.

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ATTORNEY AND PARALEGAL RATES IN FLORIDA.

   In  Rynd v. Nationwide Mutual Fire Insurance Co., 2012 WL 939247 (M.D. Fla. March 20, 2012), Download Rynd v. Nationwide Mut. Fire Ins. Co. (M.D. Fla. Case No. 8.09cv1556, Order Filed March 20, 2012) PUBLIC ACCESS, a Federal District Court considered a 57-page Report and Recommendation of a United States Magistrate Judge.  The District Judge affirmed the Magistrate Judge's reduced hourly rates for Attorneys and Paralegals retained by the Plaintiff-Policyholder.

    The Plaintiff apparently prevailed on an unspecified claim of Insurance Coverage in this case.  He was (or more accurately, perhaps, his attorneys and paralegals were) awarded the following rates by the Federal Court in Tampa:

$275.00 per hour for the named principal in a Tampa law firm, which was one of the two law firms he retained, and whose time and/or rate was reduced from a claim of $425.00/hour;

$200.00 per hour for a second attorney, from a law firm in Miami which was the other law firm retained by the Plaintiff, and apparently with the next level in experience, for whom the Plaintiff requested $275.00/hour; and

$95.00/hour for a Paralegal rate, reduced from a request for $180/hour.

 Rynd v. Nationwide Mutual Fire Insurance Co., 2012 WL 939247 at *3.

 

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