Barger & Wolen and Hinshaw & Culbertson Announce Merger

Combined Firms Create Powerhouse Insurance Practice with 120 Attorneys Dedicated to Serving the Insurance Industry


Chicago and Los Angeles — September 2, 2014 — Barger & Wolen and Hinshaw & Culberston, a national law firm with 460 lawyers in 22 offices around the country, announced today they will combine forces. The merger creates one of the largest insurance law practices in the United States with 120 full-time attorneys dedicated to providing legal counsel to insurance companies and financial services firms that shape the insurance industry.

The partner votes took place on August 28, 2014, and the merger will become effective on October 1, 2014. The combined firm will keep the name Hinshaw & Culbertson and have over 500 attorneys in 11 states as well as London.

Click here for the full press release. For more information, contact Heather Morse.  


Court favors plain and ordinary meaning of policy terms when insured claims policy language is ambiguous

Two of Barger & Wolen's lawyers -- Martin Rosen and Ophir Johna -- received a victory from the Ninth Circuit Court of Appeal earlier this week in Glassman v. Crown Life Ins. Co., 2013 U.S. App. LEXIS 21312 (9th Cir. 2013). 

In Glassman, the plaintiff insured sued his disability insurer, Crown Life, claiming that while Crown Life had been paying his disability claim for well over two decades, it had failed to increase his benefits each year due to a cost of living adjustment rider that he had purchased with the policy. With well over 20 years of purported policy benefit increases at issue, the amount at stake exceeded $1.5 million.

Crown Life brought a motion to dismiss the action based on both policy interpretation and statute of limitation grounds. 

Although the United States District Court for the Central District of California (Judge Steven V. Wilson) permitted the insured to conduct discovery, the court eventually granted Crown Life's motion to dismiss. 

It ruled (as Crown Life had argued) that the language of the rider served to increase a potential residual disability benefit, but did not increase the amount of total disability benefits payable in any month. The insured appealed the district court's ruling. 

On appeal, the Ninth Circuit sided with Crown Life and affirmed the district court's ruling, finding that "The language of the Rider unambiguously applies only to partial or 'residual' disability benefits, rather than total disability benefits." Id. at *1-2.

The opinion, while unpublished, is a reminder to insureds and their lawyers that simply contending that policy language is ambiguous does not make it so, and that courts will construe policy language in its plain and ordinary meaning.

To listen to the Ninth Circuit arguments, click here.

Could Medpay Be The Latest Target In California Bad Faith Claims?

Marina Karvelas was quoted in a July 18, 2013, article published by Claims Journal, Could Medpay Be The Latest Target In California Bad Faith Claims, about a recent appeals court decision in California dealing with bad faith claims related to medical payments coverage.

The case, Justin Barnes v. Western Heritage Insurance Company, involved a plaintiff who was injured at 11 years old when a table fell on his back during a recreational program. A superior court found that the plaintiff could not sue the recreational program provider's insurance for bad faith for denying him coverage in part because the plaintiff had already settled a suit against the program provider. The appeals court reversed the trial court's decision.

Karvelas told the Claims Journal that she thought the decision could increase bad faith claims relating to medical payments coverage if the decision survives scrutiny by the California Supreme Court.

The Barnes decision muddies the waters on the collateral source rule which up until this decision was fairly clear in California,” she said. “An insurance policy taken out and maintained by the alleged wrongdoer, including its medpay provisions, is not wholly independent of him/her and thus cannot be considered to be a collateral source.

“Stated simply, the injured plaintiff cannot recover against the tortfeasor under the liability provisions of the tortfeasor’s insurance policy and then sue the insurance company under the medpay provision of that same policy. The Barnes court concluded differently. The medpay provision in a tortfeasor’s liability policy can be construed as a collateral source. As a third party beneficiary of the medpay provisions, all the injured plaintiff has to do is allege the insurance company committed a wrongful act against him/her when handling the medpay claim. In Barnes, Western Heritage allegedly failed to notify the injured plaintiff of the one-year time limit to present medpay claims. The alleged failure violated California’s regulations governing the fair settlement of claims,” Karvelas said. “The Barnes decision is problematic for insurers not only with respect to the collateral source rule but reflects an ever increasing effort by California’s plaintiff’s bar to create private rights of action for violation of the fair claims settlement regulations.”

Karvelas also told the publication that policy changes to medical payments coverage may be looming.

“It may behoove insurers to add provisions to their liability policies that the Barnes court found were missing in the policy at issue. These would include provisions that reflect an intent that payment under the liability provisions of the policy extinguishes the insurer’s obligation under the medpay provisions of that same policy,” Karvelas said.


White House Delays Implementation of Employer Coverage Mandate of ACA

On Tuesday, July 2, 2013, the U.S. Department of Treasury announced that it will provide an additional year before the mandatory employer and insurer reporting requirements of the Affordable Care Act (ACA) begin.  

In a blog posting, Mark J. Mazur, Assistant Secretary for Tax Policy at the U.S. Department of Treasury, stated that the Administration has been engaging in a dialogue with businesses about the new reporting requirements under the ACA.  

According to Mr. Mazur, "[w]e have heard concerns about the complexity of the requirements and the need for more time to implement them effectively."  

The additional year will meet two goals, according to Mazur:

First, it will allow us to consider ways to simplify the new reporting requirements consistent with the law.  Second it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees."    


UnitedHealth to Exit California's Individual Health Market By Year End

UnitedHealth recently announced that it will be leaving California's individual health market at the end of this year.  

UnitedHealth's announcement comes on the heels of a similar announcement by Aetna last month. Both UnitedHealth and Aetna will remain in California's group market.  

UnitedHealth and Aetna combined account for approximately 7% of California's individual health market, while Blue Shield of California, Anthem Blue Cross and Kaiser Permenente, collectively, account for approximately 87% of California's individual market.

Recent decision limits the protections from liability for ERISA pension plan fiduciaries

James Hazlehurst wrote an article published in The Daily Journal on June 12, 2013, that discussed the Ninth Circuit Court of Appeals ruling in Harris v. Amgen that limited the protections from liability for ERISA pension plan fiduciaries afforded by the “presumption of prudence” for investments in employer stock.

As Hazlehurst points out, the “presumption of prudence” developed out of the tension between the competing goals of protecting employee pension plan investments and providing loyalty incentives to employees. The prudent investor standard requires plan fiduciaries to diversify investments held by the plan. To allow for employee loyalty incentives through employer stock, Congress created an exception to the diversification requirement for investments in the stock of an employer. 

In Amgen, the Ninth Circuit expanded on a previous ruling, Quan v. Computer Sciences Corp., identifying circumstances under which the “presumption of prudence” does not apply. Hazlehurst notes that Amgen is important in defining the limits of the protections afforded by the “presumption of prudence.”

The case clarifies that a company is not protected from liability as a plan fiduciary unless the company exclusively delegates its investment authority under the plan and expressly disclaims that authority.

Without that delegation and disclaimer, Hazlehurst continues, the company may be liable for plan losses as a fiduciary.

Thus Amgen illustrates why companies should not only be concerned with running afoul of securities law for material misrepresentations and omissions in connection with the sale of their stock. Those same activities may expose the company to liability for pension plan losses where the company has not adequately delegated and disclaimed its investment authority under the plan and is not otherwise protected by the “presumption of prudence.”


Barger & Wolen Launches Disability Insurance Industry Conference

We at Barger & Wolen have exciting news to share with you.

On May 16-17, 2013, we will host the inaugural Definitive Disability Conference in Boston, an industry conference designed for in-house counsel and experienced claim personnel. The conference will be chaired by Martin Rosen, who heads Barger & Wolen’s Disability, Life and Health practice group.

The primary objectives for the Definitive Disability Conference are: (1) to create a conference focused solely on disability insurance issues; (2) to design the conference with the experienced disability insurance professional in mind; (3) to limit the conference to industry-related personnel and their counsel; and (4) to ensure that the conference provides great value for the price.

To accomplish these goals, Marty has secured speakers from the following companies, law firms and other entities:

  • Ameritas
  • Berkshire Life Insurance Company of America
  • Cigna
  • Colonial Life Insurance Company
  • CSC Financial Services Group
  • Disability Management Services, Inc.
  • First Mediation Corporation
  • Funk & Bolton, P.A.
  • Kunz, Plitt, Hyland & Demlong PC
  • Metropolitan Life Insurance Company
  • Mutual of Omaha Insurance Company
  • Nawrocki Smith LLP
  • Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
  • Shipman & Goodwin LLP
  • Shutts & Bowen LLP
  • Sun Life Financial
  • Unum Group

We are very excited about the inaugural conference and look forward to seeing you in Boston next spring.

For more information, please click on the following hyperlinks:

Ÿ         Definitive Disability Conference

Ÿ         Conference Program and Agenda

Ÿ         Speakers

Ÿ         Sponsorship Opportunities

Ÿ         Fees

Ÿ         Registration Form

Ÿ         Hotel

Ÿ         FAQs


Podcast: Impact of Recent California Legislation

Sam Sorich recently participated on an A.M. Best podcast where he addressed recent legislation passed by the State of California, and the potential impact of these bills on insureds and the upcoming election.

You can listen to the podcast here.

Originally posted to Barger & Wolen's Insurance Litigation & Regulatory Law blog.

Supreme Court Upholds Affordable Care Act, But Just Barely

Barger & Wolen partner John LeBlanc and summer associate Natalie Ferrall wrote an article published in the Westlaw Journal – Insurance Coverage on Aug. 10, 2012, about the Supreme Court's closely watched ruling on healthcare reform and how the court found its controversial individual mandate to be constitutional.

In their article, LeBlanc and Ferrall note that the court focused on two key provisions of the Patient Protection and Affordable Care Act: the individual mandate, requiring most Americans to have insurance coverage; and the Medicaid expansion requirement which, had the court not struck it down, would have required states to meet certain federal requirements to receive funding. The article provided legal context and background on the Affordable Care Act and discussed how the court came to the conclusion that the law was “mostly constitutional.”

“In doing so, the court emphasized that its role was not to address the soundness of federal policy, but rather to interpret the law and enforce limits on federal power,” LeBlanc and Ferrall wrote.

Please click on the link to download the PDF: Supreme Court Upholds Affordable Care Act, But Just Barely.

Signatures Filed for California Health Insurance Initiative

By Samuel Sorich

Supporters of a proposed California initiative that would give the Insurance Commissioner the power to approve health insurance rates have filed signatures to qualify the measure for a place on the November 6, 2012 ballot.

The initiative needs 504,760 valid signatures to qualify. County clerks now are counting the filed signatures.

Under the initiative, rate approval statutes similar to those enacted by Proposition 103 in 1988 for most property and casualty insurance would be made applicable to health insurance.

The initiative also would affect automobile and homeowners insurance. For health insurance, as well as automobile and homeowners insurance, the initiative would prohibit insurers from using the absence of prior insurance coverage or a person’s credit history as a rating factor or a criterion for determining insurance eligibility.

The initiative is summarized in this blog here.     

Health Insurance Rescission Case Upheld by California Appellate Court

On Wednesday, December 28, 2011, the First District Court of Appeal affirmed the trial court's granting of summary judgment in Hagan v. California Physicians' Service dba Blue Shield of California, et al, Case No. A130809 (unpublished), a health insurance rescission matter.

The matter was handled by Barger & Wolen Senior Partners John M. LeBlanc and Sandra Weishart, Senior Associates Ophir Johna and Vivian Orlando, and Greg Pimstone of Manatt, Phelps and Phillips


In 2005, the Hagan family applied for health coverage with Blue Shield of California Life & Health Insurance Company. Beginning in 2001, Lori Hagan -- in her mid-thirties -- began to experience heavy menstrual cramping and bleeding. Over the next four years, she saw at least four physicians who diagnosed her with an enlarged uterus, fibroid tumors, menorrhagia and dysmenorrhea. She underwent exploratory laparoscopic surgery under general anesthesia, which confirmed the fibroid tumors and also revealed uterine adhesions and endometrial tissue. Ms. Hagan also underwent hormone therapy to treat the bleeding and severe pain. She was advised on multiple occasions that she needed to consider a hysterectomy or uterine ablation as treatment options.  

In applying for insurance coverage, however, the Hagans failed to disclose any of this information, despite application questions that asked the applicants to disclose any treatment, advice or symptoms concerning the female reproductive system, such as abnormal bleeding or fibroids, questions that inquired about any visits to the hospital, outpatient center, surgeries, and questions that requested disclosure of any other symptoms, conditions or recommended treatment not mentioned elsewhere on the application. 

In response to the application question that asked the applicants to disclose their last physician visit, Ms. Hagan failed to disclose that she had seen her physician just three weeks earlier, where he had again diagnosed her with painful symptoms related to her fibroids and where they again discussed hysterectomy as an option. 

Blue Shield Life rescinded the policy after it discovered these misrepresentations and omissions.

Though not required, Blue Shield Life paid all of the medical expenses incurred by the Hagans through the date of the rescission. The Hagans obtained replacement coverage within a few days, and Ms. Hagan was not deprived of any medical treatment as a result of the rescission.

Unfortunately, Ms. Hagan later passed away from uterine cancer. John Hagan sued Blue Shield Life alleging breach of contract, breach of the covenant of good faith and fair dealing and punitive damages. 

The Court's Decision

In upholding the trial court's decision granting summary judgment, the Court of Appeal first reviewed general principles governing an insurer's right to rescind. It rejected Hagan's argument that the language of Blue Shield Life's policy required it to prove that the Hagans' misrepresentations were intentional. 

The Court then reviewed the undisputed evidence in detail, in light of the specific questions on the application, as well as the excuses proffered by Hagan for why Ms. Hagan failed to disclose her long medical history, and concluded that the trial court properly granted summary judgment in Blue Shield Life's favor, in that there were clear misrepresentations and omissions of material facts on the application. 

The Court also found that Blue Shield Life did not engage in postclaims underwriting as defined in California Insurance Code section 10384

The Court held that the case was governed by the legal standards concerning underwriting and rescission set forth in Nieto v. Blue Shield of California Life & Health Insurance Company, 181 Cal. App. 4th 60 (2010) (click here for list of prior posts on Nieto). 

According to the Court, Blue Shield Life can only be guilty of postclaims underwriting if the "written information submitted on or with" the Hagans' application gave rise to "reasonable questions" that Blue Shield Life failed to resolve prior to issuing the policy. 

Against the background of California law that entitles Blue Shield Life to rely on the accuracy of the information the Hagans provided on their application (i.e., Blue Shield Life was not required to assume any of the Hagans' statements were false), Blue Shield Life properly completed its medical underwriting, and therefore did not violate Insurance Code section 10384.

Barger & Wolen's Life, Health, Disability Insurance Law Blog Named to The Insurance Law Community's Top Blogs for 2011

Barger & Wolen's Life, Health, Disability Insurance Law and Insurance Litigation & Regulatory Law blogs have been named to LexisNexis' Insurance Law Community's Top Insurance Blogs 2011.

According to LexisNexis,

These top blogs offer some of the best writing out there. They contain a wealth of information for all segments of the insurance industry, and include timely news items, expert analysis, practice tips, frequent postings and helpful links to other sites and sources.

These sites demonstrate the power of the blogosphere, by providing a collective example of how bloggers can—and do—impact and influence the law and the business of insurance.

We are honored to be included among so many well-written and well-regarded blogs.

A Firm Approach
Our philosophy for our blogs is to provide an open platform for our partners and associates to write. Whether commenting on a recent news item, informing our readers about a new piece of legislation, or providing case summaries and case reviews, each of our blogs maintains a distinct focus:

For all of their hard work, we would like to congratulate and thank the editors of our blogs, as well as all our attorney contributors.

All of our blogs are available for complimentary subscription via e-mail or RSS feed. Please visit each blog individually to subscribe.

In addition to our insurance law focused blogs, please visit the firm's Litigation Management & Attorney Fee Analysis Blog.

U.S. News & World Report & Best Lawyers Names Barger & Wolen to Their Best Law Firms List

Barger & Wolen is proud to announce that the firm has received a first-tier ranking in the 2011-2012 U.S. News – Best Lawyers “Best Law Firms” survey for our regional Los Angeles insurance law practice. The firm is also recognized for our national insurance law practice as well.

In addition, partners Kent R. Keller and Royal F. Oakes are listed for their work in Insurance Law.

“Barger & Wolen continues to be honored by our inclusion in US News & World Report and Best Lawyers’ ranking for the second year in a row,” said Steven H. Weinstein, chairman for Barger & Wolen. “Receiving this national recognition for the work our firm is doing validates for us that we truly are providing the quality legal services our clients’ demand, while maintaining the competitive price structure the insurance industry seeks.”

About the Survey

U.S. News & World Report uses data compiled by Best Lawyers to produce their Best Law Firms rankings. Best Lawyers combines hard data with peer reviews, and client assessments to produce their annual reports.

Rankings of 75 national practice areas are included in U.S. News & World Report’s Money issue, available November 15, with the full results available online today here.

Health Care Rate Regulation Bill Stalls In State Senate

Controversial California Assembly Bill 52 (“AB 52”), which, among other things, granted the California Department of Insurance (“CDI”) and the California Department of Managed Health (“DMHC”) the authority to reject or modify any proposed rate or rate change by a health insurer or health care service plan, has stalled out in the California Senate. Under current law, neither the CDI nor the DMHC has the authority to reject or modify proposed rates or rate changes.

While AB 52 had previously cleared the California Assembly in June, on Wednesday August 31, 2011, AB 52’s author – Assemblyman Mike Feuer – halted efforts to try to get AB 52 passed by the Senate this year, indicating that there were insufficient votes to win approval from the Senate before the deadline next week for approving bills. Assemblyman Feuer stated that he would re-visit passage of AB 52 next year when the Senate returns to session.

Concerns Growing Over Additional Health Care Mandates

The California Legislature is looking to impose additional health coverage mandates on Californians, forcing insurers to cover such things as acupuncture and tobacco cessation drugs. Insurers are concerned over the costs of these mandates, especially in light of federal reforms.  

A recent article, Health insurers to fight Calif. coverage mandates, by , discusses why these new mandates might do more harm than good:

The state Legislature is considering a bumper crop of 15 bills that would increase what health insurers have to cover - everything from acupuncture to maternity care to autism treatments.

California has a long history of mandating or trying to impose coverage requirements on health insurers. But what's different this year is that insurers are gearing up for a fight based on the year-old federal health care law, which will establish a minimum level of benefits that insurers would have to provide for their products to be sold in the new marketplace.

If California forces its health insurers to cover more than the federal government requires, the state will be on the hook for the extra costs in subsidized policies. And with a budget deficit of $26 billion, that's probably not something the state can afford.

Barger & Wolen will continue to track these bills as they move their way through the legislature. For a list of health care bills introduced in California, please see the California Association of Health Plan's Legislative Update.

Guidelines for Health Insurers Requesting Rate Increase Issued by California Insurance Commissioner (SB 1163)

by Marina Karvelas

On February 4, 2011, California Insurance Commissioner Dave Jones released draft guidelines for implementing SB 1163 (“Guidance 1163:2”).

SB 1163, signed by former Governor Schwarzenegger on September 30, 2010, responds to the federal Patient Protection and Affordable Care Act (“PPACA”), which requires the United States Secretary of Health and Human Services to establish a process for the annual review of “unreasonable” increases in premiums for health insurance coverage.

Under the federal act, health insurers must submit to the secretary, and the relevant state, a justification for an “unreasonable” premium increase prior to implementation of the increase.

SB 1163, effective January 1, 2011, requires health insurers to file with the California Department of Managed Health Care or the California Department of Insurance detailed rate information regarding proposed premium increases and requires that the rate information be certified by an independent actuary. 

The bill authorizes the departments to review these filings and issue guidance regarding compliance. It also requires the departments to consult with each other regarding specified actions as well as post certain findings on their Internet Web sites.

In his draft guidelines (“Guidance 1163:2”), Commissioner Jones lists several factors that will be used by the Department to determine if a rate is “unreasonable.”

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Patient Protection and Affordable Care Act of 2009 Declared Unconstitutional and Void

On January 31, 2011, United States District Judge Roger Vinson, sitting in the Northern District of Florida, ruled that the Minimum Essential Coverage Provision in the Patient Protection and Affordable Care Act of 2009 (“PPACA”), recently enacted by Congress, violated the United States Constitution

The Minimum Essential Coverage Provision – referred to as the “individual mandate” -- requires that most United States citizens purchase health insurance by 2014 or face a penalty included in the individual’s tax return.

Because he found that this provision was not severable from the remainder of the PPACA, Judge Vinson declared the entire PPACA void. 

The lawsuit challenging the constitutionality of the PPACA was filed by the Attorneys General and/or the Governors of Alabama, Alaska, Arizona, Colorado, Florida, Georgia, Idaho, Indian, Iowa, Kansas, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Ohio, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Washington, Wisconsin, and Wyoming, along with two private citizens and the National Federal of Independent Business (collectively the “Plaintiffs”). 

The Plaintiffs contended, among other items, that the individual mandate exceeded the power of Congress under both the Commerce Clause and Necessary and Proper Clause of the United States Constitution. 

Judge Vinson agreed, explaining in a 78-page opinion, that the provision attempted to impermissibly regulate “economic inactivity,” as the Commerce Clause only permits Congress to regulate “activity.” A copy of Judge Vinson’s opinion can be found here.

It is widely anticipated that the ultimate resolution of the constitutionality of the PPACA will be made by the United States Supreme Court.

Emergency Regulations to Enforce PPACA Medical Loss Ratio Guidelines Granted to California Department of Insurance

On Monday January 24, 2011, newly elected California Insurance Commissioner Dave Jones announced in a press release that he had obtained approval from the California Office of Administrative Law to issue an emergency regulation allowing the Department of Insurance (the “Department”) to enforce the medical loss ratio guidelines in the Patient Protection and Affordable Care Act of 2009 (“PPACA”). 

As of January 1, 2011, the PPACA requires all health insurers in the individual market to maintain an 80% medical loss ratio. The Department obtained approval to amend 10 California Code of Regulations § 2222.12 to mirror this requirement. A copy of the amended text can be viewed here

The emergency regulation went into effect on January 24, 2011, and expires on July 26, 2011. It requires California health insurers to demonstrate compliance with the 80% medical loss ratio at the time of the Department’s rate review.

Provision in the Patient Protection and Affordable Care Act of 2009 Requiring Individuals to Purchase Health Insurance Declared Unconstitutional

On December 13, 2010, United States District Judge Henry Hudson, sitting in the Eastern District of Virginia, ruled that the Minimum Essential Coverage Provision in the Patient Protection and Affordable Care Act of 2009 (“PPACA”) recently enacted by Congress violated the United States Constitution. The Minimum Essential Coverage Provision requires that most United States citizens purchase health insurance by 2014 or face a penalty included in the individual’s tax return. 

The lawsuit challenging the constitutionality of the Minimum Essential Coverage Provision in the PPACA was filed by the Commonwealth of Virginia. The state contended, among other items, that the Minimum Essential Coverage Provision exceeded the power of Congress under both the Commerce Clause and General Welfare Clause of the United States Constitution. Judge Hudson agreed, explaining in a 42-page opinion, that the provision “exceeds the constitutional boundaries of congressional power.”

Reports indicate that President Obama’s administration intends to appeal the decision. It is widely anticipated that the ultimate resolution of the constitutionality of the Minimum Essential Coverage Provision will be made by the United States Supreme Court.

Patient Protection and Affordable Care Act of 2009 Now in Effect

By Larry M. Golub and Misty A. Murray

On March 23, 2010, President Obama signed the Patient Protection and Affordable Health Care Act of 2009 (“PPACA”) into law. (After the amendments made March 30, 2010, the law is referred to as The Affordable Care Act.) 

While Republicans in Congress vow to repeal such enactment, key aspects of the PPACA went into effect on September 23, 2010, which marks the six-month anniversary of the legislation. 

Although the following list is not exhaustive, here are some of the more notable changes in the health care reform law (effective September 23, 2010) that will apply to individual and group health plans:

Coverage Changes

No Lifetime or Annual Limits on Essential Benefits:

Health plans may not contain lifetime limits on the amount of benefits that will be provided for essential benefits. No regulations have yet been issued regarding the definition of “essential benefits, which in general include, but are not limited to, ambulatory patient services, emergency services, hospitalization, maternity and newborn care, prescription drugs, laboratory services, preventive and wellness services, and chronic disease management.  As for annual limits, for plan years beginning before January 1, 2014, the Department of Health and Human Services’ (“HHS”) interim regulations adopt a three-year phase-in approach of removing annual limits on essential health benefits. For more information, click here.

Anti-Rescission Rules:

Health plans may not rescind, i.e., retroactively cancel coverage, except in cases of fraud or intentional misrepresentations of material fact. These rules do not apply to prospective cancellations or any cancellation due to failure to timely pay premiums.

Mandatory Preventative Health Care Services:

Health plans must provide benefits without cost sharing (i.e., no co-payments, deductibles or co-insurance) for certain preventative services, including, but not limited to, immunizations recommended by the CDC, as well as preventative care and screening for infants, children and adolescents and for women as recommended by the Health Resources and Services Administration. Grandfathered health plans are exempt. (A grandfathered health plan is a group health plan that was created – or an individual health insurance policy that was purchased – on or before March 23, 2010, and a health plan must disclose in its plan materials whether it considers itself to be a grandfathered plan.) 

Extension of Adult Dependents Coverage:

For health plans that elect to provide dependent coverage, such coverage must be extended to adult children up to age 26.

No Pre-existing Condition Exclusions for Children:

Health plans may not impose any preexisting condition exclusions for children 19 and under. (Grandfathered plans are exempt.).

Patient Protection Changes

Right to Choose Primary Care Provider (“PCP”):

For health plans that require designation of a PCP, the patient must be allowed to designate any participating PCP accepting new patients. For children, any participating physician specializing in pediatrics can be designated as the child’s PCP and, for women, any participating OB-GYN can be designated as a PCP.

Coverage for Emergency Services:

For health plans that provide coverage for emergency services, such plans must do so without requiring prior authorization and regardless of whether the provider of emergency services is a participating provider. Emergency services provided by a non-participating provider must also be provided at the same level of cost-sharing as would apply to a participating provider.

Appeals Process:

Group plans must provide for an internal appeals process that complies with the U.S. Department of Labor regulations and individual plans must provide an internal appeals process that comports with the standards established by the Secretary of Health and Human Services. Both group and individual plans must also provide for an external appeals process that complies with applicable law or at a minimum with the NAIC Uniform External Review Model Act.

Additional health care reform changes will continue to take effect in 2010 and as late as 2018. More information about the PPACA can be found on the National Association of Insurance Commissioners (NAIC) website here.

For additional information on ERISA plans and the PPACA, the U.S. Department of Labor has posted information on its website here.

For additional information on the PPACA and individual policies and nonfederal governmental plans, the HHS has posted information on its websites here and here.

Department of Insurance Issues Emergency STOLI Regulations

Effective July 29, 2010, less than a month after California’s first Stranger Originated Life Insurance (“STOLI”) legislation, Senate Bill 98, took effect, the California Department of Insurance (“DOI”) issued emergency regulations designed to implement the legislation. 

As previously reported, Senate Bill 98 proscribes STOLI transactions (defined as “act[s], practice[s], or arrangement[s] to initiate the issuance of a life insurance policy in this state for the benefit of a third-party investor who, at the time of policy origination, has no insurable interest, under the laws of this state, in the life of the insured”) and restricts the transfer of life insurance policies during the first two years after their issuance.

The DOI’s proposed regulations delineate procedures for the licensing of life settlement providers and brokers, specify forms for provider and broker applications and set forth procedures for the filing of life settlement forms with the Insurance Commissioner prior to use. 

The proposed regulations also mandate certain disclosures to consumers, including the availability of alternatives to life settlement, the possible tax consequences of a life settlement and the potential limitations on the insured’s ability to obtain additional life insurance following a life settlement.

Other states continue to join California in enacting STOLI legislation; Wisconsin and New Hampshire passed similar STOLI legislation in May and June 2010, respectively.

Blue Shield Wins Summary Judgment in Rescission Case

by John M. LeBlanc and Ophir Johna

On September 20, 2010, the Lake County Superior Court granted summary judgment in favor of Barger & Wolen client Blue Shield of California Life & Health Insurance Company in the health insurance rescission action titled John M. Hagan v. California Physicians’ Service, et al. 

Blue Shield Life was represented by Barger & Wolen partners John M. LeBlanc and Sandra I. Weishart and senior associate Ophir Johna, and by Gregory N. Pimstone from Manatt, Phelps & Phillips, LLP.

In 2006, Blue Shield Life rescinded a health insurance policy issued to the Hagan family after discovering that they misrepresented and omitted Ms. Hagan’s ongoing, serious medical problems and treatment in their insurance application. Had it known about Ms. Hagan’s true medical history, Blue Shield Life would not have issued the policy. 

The Hagans asserted several claims against Blue Shield Life, including breach of contract and bad faith. They contended that the rescission was improper and that it amounted to illegal “post-claims underwriting.”

On Monday, the court rejected all of the Hagans’ arguments, granting summary judgment as to the entire action and thereby confirming that Blue Shield Life was legally justified in rescinding the Hagans’ policy. 

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Barger & Wolen Receives First-Tier Ranking in the Inaugural "Best Law Firms" Survey by U.S.News and Best Lawyers®

Barger & Wolen is proud to announce that the firm has received a first-tier ranking by U.S. News and Best Lawyers® for our Nationwide Insurance practice, as well as our regional practice in Los Angeles. In addition, partners Kent R. Keller and Royal F. Oakes are listed for their work in Insurance Law.

“We are honored to be included with such a distinguished group of law firms,” said Steven H. Weinstein, chairman for Barger & Wolen. “It is especially rewarding to have our peers note our work. It validates, for us, that a mid-sized firm can provide incredible legal services, while maintaining the competitive price structure the insurance industry seeks.”

About the Rankings:
"U.S. News is the world’s leading publisher of institutional rankings based on both objective data and peer evaluations," says Steven Naifeh, President of Best Lawyers. "We are combining this expertise with Best Lawyers’ experience of providing rankings of individual lawyers based on peer reviews for almost three decades. By combining hard data with peer reviews, and client assessments, we believe that we are providing users with the most thorough, accurate, and helpful rankings of law firms ever developed."

Barger & Wolen's Insurance Law Blogs Named to Top 50 Blogs by LexisNexis Insurance Law Community

Barger & Wolen's insurance law blogs have collectively been ranked No. 5 by LexisNexis in the Insurance Law Community's Top 50 Insurance Blogs 2009 Honorees.

According to LexisNexis,

These top blogs offer some of the best writing out there. They contain a wealth of information for all segments of the insurance industry, and include timely news items, expert analysis, practice tips, frequent postings and helpful links to other sites and sources. 

Demonstrating on a daily basis that insurance makes the world go round, these blogs also show us how insurance issues interact with politics and culture. These sites also demonstrate the power of the blogosphere, by providing a collective example of how bloggers can—and do—impact and influence the law and the business of insurance."

We are honored to be included among so many well-written and well-regarded blogs.

A Firm Approach
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NAIC to Address Stranger-Owned Annuities in Public Hearing

One month from today, the National Association of Insurance Commissioners (“NAIC”) will hold a meeting to address Stranger Originated/Owned Annuities (“STOA”). Similar to Stranger Originated/Owned Life Insurance (“STOLI”), STOA transactions often involve seniors and terminally ill individuals who were induced to purchase annuities largely for the benefit of an investor. The NAIC is “determined to address how individuals are being affected by these new transactions and whether new or modified current laws or regulations are necessary to protect consumers,” stated Thomas R. Sullivan, NAIC’s Life Insurance and Annuities Committee Chairman and Connecticut’s Insurance Commissioner. The May 20th public hearing in Washington, D.C. is expected to include testimony from consumers, state regulators and industry representatives.

State legislatures across the country have focused in recent years on the enactment of STOLI regulations. For example, California enacted its first legislation in October 2009, classifying the underlying transactions as fraudulent. Experts report that STOA could be the subject of similar legislation in the near future. However, the NAIC’s investigation and possible regulation of STOA would be limited to transactions involving insurance, because transactions involving variable annuities are outside the state insurance commissioners’ regulatory authority; they are instead regulated by the Securities and Exchange Commission and the Financial Industry Regulatory Authority.

Assembly's Insurance Committee to Hold Hearing Today on Legislation Voiding Discretionary Clauses in Disability and Life Insurance Policies

The California Assembly’s Insurance Committee is scheduled to conduct its first hearing today on AB 1868, a bill outlawing clauses in insurance policies and other related documents that purport to vest the insurer with discretionary power to determine eligibility for benefits or to interpret the terms of the policy.

Under the proposed legislation introduced by Assemblyman Dave Jones (D-Sacramento), any provision in an insurance policy, contract, certificate or agreement providing or funding life insurance or disability insurance coverage that purports to reserve discretionary authority with the insurer would be void and unenforceable. The bill would also require that the Insurance Commissioner disapprove of any disability policy containing such a provision.

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California Appellate Court Affirms Trial Court's Order Holding Putative UCL Class Should Not Be Certified

In a decision published October 26, 2009, a unanimous panel of the Fourth Appellate District, Division Three, affirmed the trial court’s order denying class certification in a case handled by Barger & Wolen, Kaldenbach v. Mutual of Omaha et. al. Among other things, the court of appeal held that the California Supreme Court's recent decision in In re Tobacco II Cases, 46 Cal.4th 298 (2009) (“Tobacco II”) did not mandate reversal of the trial court's decision.

Kaldenbach's case arose from his purchase of an alleged “vanishing premium” life insurance policy. He claimed that, when he purchased an “Advantage Life” universal life insurance policy from Defendant Mutual of Omaha Life Insurance Company (“Mutual”), his agent represented that he would have to pay only four annual premiums, after which he would never have to pay another premium. Kaldenbach alleged those oral representations were false, as he later was required to pay more than four premiums to keep his policy in force. Seeking to transform his individual dispute into a class action, Kaldenbach also alleged that Mutual committed “class-wide” misrepresentations and omissions in scripted presentations and standardized marketing and training materials which, among other things, supposedly violated California’s Unfair Competition Law, Business and Professions Code section 17200 et seq. (“UCL”).

In opposing class certification, Mutual showed that the class allegations involved thousands of individualized point-of-sale transactions between a policy owner and an agent — a scenario that courts consistently hold is not subject to class treatment. Mutual’s evidence demonstrated that Kaldenbach’s case, like those of the other putative class members, was based upon the unique dialogue between an agent and a policy owner, and that marketing materials, agent training and sales illustrations were not uniform. The trial court denied class certification, holding that Kaldenbach failed to meet any of the criteria required for class certification. Kaldenbach thereafter filed an appeal.

Prior to the hearing on Kaldenbach’s motion for class certification, Californians passed Proposition 64 (“Prop 64”), which limited standing under the UCL to a “person who has suffered injury in fact and has lost money or property as a result of [such] unfair competition.” See Business and Professions Code § 17204. Additionally, Prop 64 mandated that UCL representative actions satisfy class action requirements under California Code of Civil Procedure section 382. At the time the trial court decided Kaldenbach’s class certification motion, Tobacco II — which raised the issue of whether, after Prop 64, each class member was now required to show an injury in fact, consisting of lost money or property, as a result of the alleged unfair competition — was pending before the California Supreme Court.

After Kaldenbach and Mutual completed their briefing and oral argument on appeal, the Supreme Court issued its opinion in Tobacco II, holding that, to demonstrate standing to pursue a UCL claim as a class action, only the named plaintiff must show an injury in fact, consisting of lost money or property, as a result of the alleged unfair competition. Tobacco II, supra at 305-306, 324. The Supreme Court explained that the “standing requirements are applicable only to the class representatives, and not all absent class members.” Id. at 306. Significantly, the Supreme Court also concluded that “Proposition 64 was not intended to, and does not, impose section 17204’s standing requirements on absent class members in a UCL class action where class requirements have otherwise been found to exist.” ld. at 324.

In light of Tobacco II, the court of appeal in Kaldenbach requested further briefing on UCL class action issues. In one of the first appellate decisions to interpret Tobacco II, the court of appeal affirmed the trial court’s decision, rejecting Kaldenbach’s argument that class certification was appropriate because reliance need not be proven on a class-wide basis under the UCL. The court of appeal reasoned that reliance was only one of the individualized issues noted by the trial court. Moreover, unlike Tobacco II, which involved identical misrepresentations and/or nondisclosures made to the entire class, in Kaldenbach’s case, no evidence linked alleged sales materials, training or illustrations to what was actually said or demonstrated in any sales presentation. Accordingly, the appellate court held that individualized issues predominated as to whether Mutual in fact committed an unfair business practice that was “likely to mislead” the putative class. 

Sandra Weishart and Misty Murray of Barger & Wolen are counsel for Mutual.

Will Healthcare Reform Affect the Rate of Claim Denials?

On Monday October 19, 2009, Lisa Girion of the Los Angeles Times reported on the healthcare reform bills being debated in Congress and their potential impact on claim denials by insurers. Girion states that, “Despite growing frustration with the way health insurers deny medical treatments, major healthcare bills pending in Congress would give patients little new power to challenge those sometimes life-and-death decisions.” She further explains that “a patient's ability to fight insurers' coverage decisions could be more important than ever because Congress, in promoting cost containment and price competition, may actually add to the pressure on insurers to deny requests for treatment.”

The article discusses the wrongful death lawsuit filed by Hilda and Grigor Sarkisyan, whose daughter Nataline died in 2007 after Cigna decided not to cover a liver transplant. The lawsuit against Cigna over the transplant denial was dismissed this year by a federal judge, who ruled that the Employee Retirement Income Security Act (“ERISA”) preempts suits with state law claims for damages over such health benefit decisions. The Sarkisyans traveled to Washington this year to try to persuade members of Congress to pass legislation which would remove ERISA’s bar of certain types of damages that are now available under state law.

Rep. Adam B. Schiff (D-Burbank), who met with the Sarkisyans in Washington, said that there are not enough votes in Congress to pass such legislation.  Insurers and employers strongly support ERISA’s limitations on damages. They say any increase in litigation would drive up costs and could force some employers to drop health benefits.

The healthcare reform bill pending in the House would extend the right to sue under state law for damages to anyone who buys coverage through one of the health insurance exchanges it envisions. That could include small businesses. However, the pending legislation does not remove ERISA’s barrier to such suits by employees who procure coverage in the employment-based insurance market.


Better Late Than Never: California Finally Enacts State's First STOLI Legislation

More than a year after vetoing Senate Bill 1543 and vowing to work to pass similar legislation “quickly,” California Governor Arnold Schwarzenegger signed Senate Bill 98 into law on October 11, 2009. As the rejected Senate Bill 1543 sought to do, the new law defines Stranger-Originated Life Insurance (“STOLI”) transactions as “an act, practice, or arrangement to initiate the issuance of a life insurance policy in this state for the benefit of a third-party investor who, at the time of policy origination, has no insurable interest, under the laws of this state, in the life of the insured.” The new law proscribes STOLI transactions as fraudulent, and allows the Department of Insurance to collect information from life settlement providers that will help it to monitor the market and to identify STOLI transactions. It also restricts most transactions within the first two years of a policy.

Finally, the new law adds a component the absence of which reportedly led to the rejection of Senate Bill 1543: It mandates specific disclosures to consumers, including alternatives to life settlements, and requires the licensing of professionals who transact life settlement contracts.

The law – California’s first STOLI legislation – makes California one of 26 states to enact laws regulating STOLI. Similar legislation is pending in 13 other states.

See also STOLI news post

Council for Disability Awareness Follows Approvals of Disability Claims by the SSA and Private Disability Insurers

Allison Bell of the National Underwriter reported on September 11, 2009 that approved disability claims rose more quickly in 2008 at the Social Security Disability Insurance program than at private disability insurers. She explained that the Council for Disability Awareness in Portland, Maine reported that findings in a summary of results from an analysis of SSDI program data and a survey of the 15 CDA member disability insurance companies were as follows:

SSDI applications rose 5.9% in 2008, to 2.3 million, and the number of workers approved for SSDI benefits increased 8.7%, to 895,000, the CDA reports.

The percentage of workers covered by the SSDI program who are receiving SSDI benefits increased to 4.8% in 2008, from 3.5% in 1998.

At CDA member companies, the number of individuals receiving long-term disability benefits payments increased 1.5% in 2008, to 573,500, and 30% of the member companies’ LTD claimants do not qualify for SSDI benefits, the CDA says.

Because of the aging of the U.S. workforce, the percentage of claims filed by workers under age 50 has been declining, and the number filed by workers over that age has been increasing.

But 27% of the survey participants said the overall claims rate has stayed about the same, and 64% said the incidence rate has been falling.

Only one of the participating companies said the recession has had any noticeable effect on disability claims.

Proposed Amendments to Health Care Reform Criticized By Insurance Industry

Out of the hundreds of potential amendments to the health care reform bill currently before Congress, two amendments in particular have drawn the attention of the insurance industry.

Arthur Postal with the National Underwriter discusses both amendments in his September 24, 2009 article:

Property and casualty insurance trade groups are uniting to oppose a proposed Senate health care reform amendment to merge medical components of workers’ compensation and auto insurance with health insurance.

The provision, known in industry parlance as “24-hour health coverage,” was proposed yesterday by Sen. Jay Rockefeller, D-W.Va.

In a letter to the Senate Finance Committee, which was not expected to take up the amendment today, the p&c industry argues that, “the amendment would upend the systems now in place to protect injured workers, drivers and passengers.”

The second amendment would impose an approximate $6.7 billion dollar “annual fee on health insurance providers.” Postal described the reaction from the insurance industry article stating:

If the proposed taxes are included in final legislation, the insurers said, it “would undermine the shared goals of achieving universal coverage and improving the affordability and quality of healthcare for the uninsured and for those currently with coverage.”

The insurers added that the new taxes would “likely be borne principally by those obtaining individual coverage in the exchange and by small businesses.”

As previously discussed on this blog, these amendments represent a potentially dramatic change to the insurance industry and therefore we will continue to monitor these developments.


Health Insurers Blast Tax Language In Health Reform Bill

Another Health Care Amendment Draws P&C Industry Fire





Denial of Class Certification in Annuity Case Overruled Under a De Novo Standard of Review

Last week, the Ninth Circuit Court of Appeals reversed a District Court decision denying class certification in Yokoyama v. Midland National Life Insurance Company, __ F.3d __, 2009 WL 2634770 (9th Cir. August 28, 2009). Yokoyama concerns a class action involving the sale of annuities to senior citizens where the Ninth Circuit addressed, for the first time, the standard of review of a class certification where the underlying issue is purely an issue of law. Under existing precedent articulated by Parra v. Bashas’, Inc., 536 F.3d 975, 977 (9th Cir. 2008), a district court’s class action certification is reviewed on appeal under an abuse of discretion standard of review. However, the Ninth Circuit reasoned that this conflicted with U.S. Supreme Court precedent that all issues of law must be reviewed de novo. See Salve Regina Coll. V. Russell, 499 U.S. 225, 231 (1991). In Yokoyama, the issue was whether Hawaii consumer protection statutes require a finding of individual reliance. Since the class certification turned on this narrow issue of Hawaii state law, the Ninth Circuit Court of Appeals found that the proper standard of review was de novo.


For a more detailed analysis of this case, please visit the Barger Wolen Insurance Litigation & Regulatory Law Blog.


New Regulations Require Disclosure of Data Breaches

HIPAA-covered entities need to be aware of new regulations issued this week that require public disclosure of data breaches. The U.S. Department of Health and Human Services has issued new regulations that require providers, health plans, and other HIPAA-covered entities to notify individuals when their health information is breached.

Data breaches involving protected health information must be reported to the Department of Health and Human Services. Breaches affecting less than 500 individuals can be reported to the HHS secretary on an annual basis. However, breaches that affect more than 500 individuals must be promptly disclosed to the affected individuals, the HHS secretary, and the media.

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President Proposes National Insurance Office

The Obama Administration is proposing the formation of a new office within the Treasury Department that would oversee the insurance industry. This announcement comes in the wake of statements from Treasury Secretary Timothy Geithner in February that some form of federal insurance oversight will likely be a part of a forthcoming financial regulatory overhaul.

Congressional bill H.R. 2609, also known as the Insurance Information Act of 2009, will establish within the Department of the Treasury the Office of Insurance Information. This new office will have the authority to monitor all aspects of the insurance industry, establish Federal policy on international insurance matters, serve as a liaison between the Federal government and the several States regarding insurance matters, and serve as an advisory to the Treasury regarding the export promotion of United States insurance products and services.

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California Insurance Commissioner Unveils Proposed Rescission Regulations

California Insurance Commissioner Steve Poizner unveiled his proposed regulations today to, according to an LA Times article dated June 3, 2009, “combat the health insurance industry practice of dropping members with costly illnesses.” According to the article, Poizner's draft regulations would require insurers to write applications for coverage in “plain English and allow applicants a ‘not sure’ answer to questions about their preexisting medical conditions.”  

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Dispute Between Securities' Brokers Not Subject to FINRA Arbitration

Valentine Capital Asset Management, Inc. v. Agahi174 Cal. App.4th 606 (2009)

Several of our insurer clients who act as broker-dealers in connection with the sale of “securities” find themselves litigating in Financial Industry Regulatory Authority (“FINRA”) (formerly NASD) arbitrations when disputes arise. Sometimes, our insurer clients prefer not to litigate in a FINRA forum under its rules. A very recent California Court of Appeals case discussed the types of disputes that are not subject to FINRA arbitration.

In Valentine Capital Asset Management, Inc. v. Agahi, the court held that a dispute between securities’ brokers was not subject to arbitration pursuant to FINRA rules because the dispute did not relate to the brokers’ activities as members of FINRA-associated firms. 

Valentine was the founder and president of Valentine Capital Asset Management, Inc. (“VCAM”) and Valentine Wealth Management, Inc. (“VWM”), neither of which was a member of FINRA.

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Victory in Health Care Rescission Case

On May 28,  Barger & Wolen client Blue Shield of California won a complete victory in the landmark health care rescission case, Cindy Hailey and Steven Hailey v. California Physicians’ Service dba Blue Shield of California (pdf).  According to a Blue Shield representative:

Today's verdict is a complete vindication for Blue Shield of California. It means we acted properly every step of the way. It means that our underwriting procedures were fair and complete, our application was clear, and we acted in good faith. There was no post-claims underwriting. The evidence of deceit by the Haileys was overwhelming. This decision proves that Blue Shield of California had every right to rescind the Haileys' coverage.

Congratulations to Barger & Wolen partner and lead trial counsel John M. LeBlanc and his team: partner Andrew S. Williams, associates Vivian I. Orlando and Jason C. Love, legal assistant Gloria Valles, and paralegals Cathie Sorenson and Eve Torres.

Welcome to Our Blog

We are very pleased to welcome you to our life, health and disability insurance law blog. We have thought about launching a blog like this for some time but this year, after much hard work and a little luck, it is here. It is one of the first blogs in the country to focus exclusively on life, health and disability insurance law issues. The goal of this blog is to become a resource for clients and attorneys by providing legal commentary, articles, news and regular law updates covering ERISA, insurance bad faith, punitive damages and other areas of the law that impact upon life, health and disability insurance law issues, with a special emphasis on California law, the Ninth Circuit Court of Appeals and federal district courts within the Ninth Circuit.

We hope you find this to be a useful resource and we look forward to your comments and feedback. 



Jury Instructions in an Insurance Bad Faith Case Need Not Include One on the "Genuine Dispute" Doctrine

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

California Supreme Court Hears Arguments Regarding Standing for UCL Class Actions

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.

Social Security Disability Backlog Delays Payments

An interesting New York Times article entitled "Disability Cases Last Longer as Backlog Rises" by Erik Eckhom discusses the Social Security Administration's ("SSA") backlog and how it affects disability payments to claimants.  The article states that the wait for appeals hearings is about 500 days, twice as long as it took in 2000. In addition, the article notes that approximately two-thirds of appeals are successful. This is not news to group disability insurers who often have provisions in their policies allowing for offsets of SSA disability benefits.

Geithner Says Federal Insurance Charter Is Important Part of Economic Plan

On February 10, 2009, Treasury Secretary Timothy Geithner stated that some form of federal insurance oversight will likely be a part of a forthcoming financial regulatory overhaul by the Obama administration.

Geithner already has been urged by a group of U.S. House members, led by Reps. Melissa Bean, D-Ill., and Ed Royce, R-Calif., to create a federal insurance office within the Treasury Department or assign a high-level Treasury appointee an insurance portfolio, to fill a void on insurance oversight and expertise at the federal level. Bean and Royce were sponsors of the House version of the National Insurance Act in the 110th Congress, and have announced plans to introduce legislation dubbed the National Insurance Consumer Protection and Regulatory Modernization Act.

Appearing before the Senate Banking Committee, Geithner offered his thoughts on the potential for a federal insurance regulator, in response to questions by Sen. Tim Johnson, D-S.D. In the last two sessions of Congress, Johnson has served as co-sponsor of the National Insurance Act, which would create an optional federal charter system for insurers and producers in both the life and property/casualty sectors.


California Insurance Commissioner Seeks Disability Insurance Changes

As reported by the Associated Press, for the second time in two months, California Insurance Commissioner Steve Poizner is being accused by his predecessor, Lt. Gov. John Garamendi, of proposing regulatory changes that will weaken consumer protections. The latest dispute involves Poizner's proposal to roll back regulations that prohibit insurers from reducing group disability insurance benefits to account for pensions, workers' compensation payments or wages that the policyholder might receive.

Poizner, a Republican who succeeded Garamendi as California's chief insurance regulator in January 2007, said the regulations are unnecessary. He maintains the insurance commissioner already has the authority under state and federal law to ban insurers from including so-called offset clauses that reduce benefits in disability policies.

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Congress to Consider Optional Federal Charter for Life Insurers

Insurance in the United States has traditionally been regulated by individual states. With the recent meltdown in the financial services industry, Congress is considering legislation to allow life insurers to operate under a federal charter, similar to the banking industry’s dual regulatory system that would allow companies to choose between the state system and a national regulatory structure. The life insurance industry has been pushing for federal legislation for years as they see the current state system as overly complex, anticompetitive and unduly burdensome in that it increases the cost of compliance and delays the launching of new products. A good article discussing this can be found at the Insurance Information Institute’s website:

One proposal would create a framework for a national system of state-based regulation, which would create uniform standards in such areas as market conduct, licensing, the filing of new products and reinsurance. Among those supporting an optional charter are large insurers that sell coverage to major corporations, reinsurers, brokerage firms, life insurers and banks that are moving into the insurance business.

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City of San Francisco Files Lawsuit Contending State Regulators Allow Discrimination Against Women

On January 27, 2009, the city of San Francisco filed a lawsuit against the California Department of Insurance (“CDI”) contending that it allows health insurers to discriminate against women when charging premiums for health insurance. The suit alleges that the CDI, Insurance Commissioner Steve Poizner and Cindy Ehnes, director of the Department of Managed Health Care, approved a system that allows the insurance companies to impose "gender rating" when pricing policies, resulting in women paying as much as 39% more for coverage than men. According to a Los Angeles Times article published on January 28, 2009, the CDI allows the practice of charging women more for health insurance than their male counterparts (i.e., “gender rating”) believing this practice to be appropriate under the existing California law.

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NAIC Looks at Disability Insurance Best Practices

The National Association of Insurance Commissioners ("NAIC") is considering the adoption of disability claims best practices guidelines to augment its Unfair Claims Settlement Practices Model Act. The Consumer Protections & Innovations Working Group held a public hearing at the NAIC Winter National Meeting.  Consumers groups, lawyers representing insureds and the industry, the ACLI, various disability insurers and several states have offered their views and proposals.  Not unexpectedly, a split has emerged over the proposed disability claims best practices list.  At a recent meeting sponsored by the NAIC, plaintiffs attorneys, such as Mark DeBofsky, advocated for the creation of formal claims guidelines because “a substantial number of claimants … are not having positive experiences,” while representatives of the insurance industry point out that a variety of legislated claims guidelines already exist (e.g., the Unfair Claims Settlement Practices Act) and therefore a national “best practices list” is unnecessary.  Industry representatives further warn that a best practices list would create de facto regulation and act as a “template for trial lawyers.”

Should a best practices list be adopted by the NAIC, Maine Insurance Director Mila Kofman said she would give insurers about a year to implement the best practices list before attempting to codify the list into law.  As a carrot to the insurers, Kofman noted that adoption of the list could act as a “shield against lawsuits.”  

The latest version of the best practices guidlines were developed late last year and will continue to be developed this year.  



Has The Age Of Billion-Dollar Verdicts Passed?

After studying the largest jury verdicts awarded in 2008, a article declared that “[t]he billion-dollar verdict has disappeared from U.S. courtrooms.”  While the fourteen years between 1991 and 2005 yielded about two billion-dollar verdicts a year, between 2006 and 2008, only one such award was issued, a 2007 verdict for $1.5 billion.

The article offered a variety of possible explanations for this trend, including State and Federal limits on damages and claims, the campaign financing of some conservative judges by business interests and United States Supreme Court decisions limiting the amount of money that can be awarded in certain instances.  Additionally, there is anecdotal evidence that plaintiffs’ counsel, wary of having excess awards eventually overturned, are not asking that juries award their clients huge punitive damages awards.  One corporate-defense attorney speculated that juries are now so cynical towards plaintiffs that even “insurance companies want juries.” 

Full Article