Life, Health and Disability Insurance Law Blog : Life, Health and Disability Insurance Law Blog : California Disability Lawyer & Attorney : Barger & Wolen Law Firm : CA Life Insurance & ERISA Law, Life Health Disability

Prospect Medical Group, Inc. v. Northridge Emergency Medical Group, 45 Cal. 4th 497 (2009)

The California Supreme Court was recently faced with the issue of whether emergency care providers that do not have contracts with the health care service plan (the “plan”) can bill the patient for the difference between the bill submitted to the plan and the actual amount received from the plan—a practice known as “balance billing.” In Prospect Medical Group, Inc. v. Northridge Emergency Medical Group, 45 Cal. 4th 497 (2009), the Court held that non-contracted emergency care providers may not engage in balance billing of plan members.

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Fontana v. The Guardian Life Insurance, 2009 WL 73743 (N.D. Cal. January 12, 2009)

Fontana, a software product manager, sued The Guardian Life Insurance Company for denying her claim for long-term disability benefits under an ERISA-governed plan. Guardian gave two explanations for its claim decision: (1) that a medical report based on examination conducted five months after the date the operative definition of disability changed cannot demonstrate Fontana’s disability; and (2) that Fontana’s activities as a graduate student dispute her claim. On cross motions for summary judgment on the Administrative Record, the Court ruled that both of these reasons constituted an abuse of discretion, and remanded the matter to Guardian for a new determination of Fontana’s administrative appeal.

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In McCoy v. Progressive West Ins. Co., 2009 WL 251127, __ Cal. App. 3d __ (Decided Feb. 4, 2009), the Second District Court of Appeal upheld the trial court’s refusal to give special instructions to the jury in an insurance bad faith action on the “genuine dispute” doctrine. The court reasoned that the case law in California establishing and applying the “genuine dispute” doctrine did not involve jury trials, and thus, did not constitute authority for a jury instruction on the genuine dispute doctrine where the parties stipulated to CACI jury instructions on the reasonableness of an insurer’s conduct. Accordingly, it was held that trial court did not err in failing to specifically instruct the jury on the genuine dispute doctrine. 

See Judicial Opinion Here

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Hecht v. Paul Revere Life Ins. Co., 168 Cal. App. 4th 30 (2008)

Practitioners in the field of bad faith disability law are all familiar with the "grandaddy" of DI cases, Erreca v. Western States Life Ins. Co., 19 Cal. 2d 388 (1942), as well as its children, Moore v American United Life Ins. Co., 150 Cal. App. 3d 610 (1984) and Austero v. Nat. Casualty Co., 84 Cal. App. 3d 1 (1978), overruled on other grounds in Egan v. Mutual of Omaha Ins. Co., 24 Cal. 3d (1979). For years these cases have explained how the concept of "total disability" is to be interpreted in California. In citing these cases, plaintiffs lawyers -- and often the courts -- would usually only cite to the first part of the famous Erreca definition: "[T]he term 'total disability' . . . means such a disability as renders the insured unable to perform the substantial and material acts necessary to the prosecution of a business or occupation in the usual or customary way." The courts seemed reluctant to qualify the definition with the second part of Erreca's teachings: "Conversely, the insured is not totally disabled if he is physically and mentally capable of performing a substantial portion of the work connected with his employment." Now Erreca has spawned a "grandchild" that confirms that the second part of the definition is equally important.

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Salomaa v. Honda Long Term Disability Plan, 542 F. Supp. 2d 1068 (C.D. Cal. 2008).

An insurer denied the ERISA plan participant’s disability claim, in part, because he failed to support his claimed disability from CFS with “objective test results.”  During the participant’s initial appeal of his LTD benefits, his attorney asked the insurer if there were any tests the participant should undergo in order to help establish his disability.  The participant’s attorney did not receive a response and yet the insurer, citing a lack of medical documentation that Plaintiff was afflicted by CFS or that he was unable to perform the duties of his occupation, denied his claim. 

After explaining that a factor tending to show a potential conflict of interest is the failure to engage in meaningful dialogue during the review process, the court found that decision to deny benefits due to the absence of objective test data while opting not the request a SPECT scan was an indication of “evasiveness during the review process, and a conflict of interest.”  Nevertheless, noting the distinction between a medical condition and the effect of that condition on an employee's ability to perform occupational duties is well established, the court “affirm[ed] a plan administrator's right to require objective evidence that employees are totally disabled by the medical condition which afflicts them, regardless the condition at issue.”

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Recently, the California Supreme Court ruled that lawsuits under the Consumer Legal Remedies Act can only be filed by individuals who suffer real damage from unlawful business practices.  According to Mike McKee’s article in the Recorder, the Court heard oral arguments on March 3 and it was not clear where the court stood on applying that same rule to every participant of class actions filed under the California's Unfair Competition Law (“UCL”).

The underlying suit, filed 12 years ago, accused Philip Morris USA, Inc. and five other tobacco manufacturers of violating the UCL by allegedly denying links between smoking and serious illnesses.  The trial court granted class certification in 2001, allowing smokers who lived in California between June 10, 1993 and April 23, 2001, to pursue claims under the UCL. But after voters passed Proposition 64 in 2004, the court decertified the class, ruling that under the ballot measure's terms, individual plaintiffs and class members did not have standing to sue unless they actually suffered harm by loss of money or property. The Fourth District Court of Appeal affirmed in 2006.

Because this decision will impact insurance industry class actions, we will follow it.  A ruling is due within 90 days.

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Standard Ins. Co. v. Morrison, 537 F. Supp. 2d 1142 (D. Mont. 2008).

A ruling by District Court Judge Donald Molloy may signal the end of discretionary authority for ERISA plans in Montana.  Standard Insurance Company brought suit against John Morrison, the Insurance Commissioner for the State of Montana.  Morrison had implemented a state-wide policy disapproving ERISA plans that contained any clauses that conferred discretionary authority to the plan/claims administrator, which would give rise to a more deferential judicial standard of review when the decision of the plan/claim administrator is challenged in the district court. 

Standard Insurance argued Morrison’s actions were pre-empted by ERISA and exceeded his authority.  However, the court found neither argument persuasive and stated that there was no law granting Standard the right to a particular standard of review.  The court reasoned that “ERISA’s Savings Clause recognized the traditional role of states in regulating insurance on behalf of state citizens and in accordance with state public policy objectives.”  This case "is the straight forward regulation of insurance, a matter ERISA expressly saves from preemption.”

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