Insurance Claims And Issues

Payments Preserved in Senate for Health Insurance Execs, Policyholder Attorneys.

   Payment rights have been preserved by the United States Senate for two unlikely groups of frequent adversaries:  Health Insurance Company Executives, and Policyholder Attorneys.

   In a vote on Sunday, December 6, 2009, the U.S. Senate defeated an amendment offered by Senator Blanche Lincoln, Democrat of Arkansas.  The amendment would have reduced or eliminated tax deductions for corporations paying high salaries to their executives, in basic and simple terms, thereby reducing the incentive of such corporations to pay such salaries:  but the amendment was limited to payments by Health Insurance Companies to Health Insurance Company executives.  The amendment was defeated.

   In another vote on Sunday, December 6, 2009, another amendment was defeated.  The second amendment was offered by Senator John Ensign, Republican of Nevada.  Mr. Ensign's amendment would have reduced or eliminated contingency fees for attorneys who represent persons suing doctors for medical malpractice.  That amendment was also defeated.

   The newspaper reports of Senate action over the weekend were focused instead on other activities, such as whether the Senate will find happiness in a compromise over a Public Health Insurance Option.  For example, in this report by Robert Pear and David M. Herszenhorn, "Push For Public Plan Deal Intensified" p. A12, col. 1 (New York Times Nat'l ed., Monday, December 7, 2009), the following two paragraphs are literally the bottom line:

   The Senate on Sunday rejected two proposed amendments to the health care bill.  One, offered by Senator Blanche Lincoln, Democrat of Arkansas, would have limited the tax deductions that health insurance companies could take for compensation paid to top executives.

   The other, by Senator John Ensign, Republican of Nevada, would have limited contingency fees that could be paid to plaintiffs' lawyers in medical malpractice lawsuits.

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No ERISA and No COBRA, But No Bad Faith Appeal.

   In a recent appeal from a ruling of the United States District Court for the Southern District of Florida, the Eleventh Circuit Court of Appeals was confronted with Issues, among others, of ERISA, COBRA, and whether there was Bad Faith in the appeal in Download Harris v. United Auto Insurance Group, Inc., a Florida Corporation (11th Cir. Opinion Filed August 18, 2009).

    For several reasons not addressed by the District Judge, the Eleventh Circuit affirmed an Order of Dismissal With Prejudice under Federal Rule 12(b)(6).  The Plaintiff-Policyholder was an in-house Counsel for United Automobile Insurance Group, Inc.  The Case may be made a bit confusing because the Employer is an Insurance Company, but not the Plaintiff's former Health Insurance Company.  When the Plaintiff was terminated from employment, he signed up for continuing Health Insurance Coverage under COBRA.

    The Plaintiff dutifully paid Premiums until February, 2008.  The Premium payment was due to be postmarked by February 11, 2008.  The Premium payment for that month was paid, but unfortunately "the envelope containing the payment was not post-marked until February 12."  Download Harris v. United Auto Insurance Group, Inc., a Florida Corporation (11th Cir. Opinion Filed August 18, 2009).

    The Plaintiff argued, among other things, that his Employer should be held to be bound by a Federal Regulation which, he further argued, would provide an additional timeframe for payment of Premiums.  The Eleventh Circuit held that the particular Federal Regulation "applies only to those plans that are fully-funded," and since Plaintiff's Employer's plan was "self-funding" and not "fully-funded," the Regulation did not apply, there was no extended timeframe for paying Premiums, and "UAIG was within its rights in terminating Harris's coverage."  Download Harris v. United Auto Insurance Group, Inc., a Florida Corporation (11th Cir. Opinion Filed August 18, 2009).

    Not content with victory on the merits, the Appellee Employer did something rarely done in Appeals involving Insurance Companies, particularly in Appeals originating in Florida:  It requested fees from the Insured, arguing "that Harris acted in bad faith by filing this appeal ...."   Download Harris v. United Auto Insurance Group, Inc., a Florida Corporation (11th Cir. Opinion Filed August 18, 2009).  [Emphasis added.]  As might have been anticipated before such a motion was even filed, the Eleventh Circuit refused to assess attorney's fees against Mr. Harris in addition to affirming the Order of Dismissal With Prejudice of Mr. Harris's Complaint:

    Considering these factors, an award of fees is not warranted in this case.  First, the district court made no finding that any party acted in bad faith, and the record on appeal does not establish any bad faith.

Download Harris v. United Auto Insurance Group, Inc., a Florida Corporation (11th Cir. Opinion Filed August 18, 2009).  [Emphasis added.]

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Attorney's Fees Denied To Florida Insured Unsuccessfully Seeking Certiorari.

    Florida's Attorney's Fees Statute is Section 627.428.  It requires an "insured or beneficiary" to prevail in the event of an appeal.  An intermediate Florida Appellate Court has just held that this Florida Statute does not authorize Florida Appellate Courts "to grant fees to an insured who does not succeed in his or her application for certiorari."  Grider-Garcia v. State Farm Mutual Automobile Insurance Co. (Fla. 5th DCA Case No. 5D08-3793, Opinion Filed June 12, 2009), attached slipsheet Official Opinion at 4.

    The Florida intermediate Appellate Court followed the Supreme Court of Florida's ruling in the case of Brass & Springer, P.A. v. United Automobile Insurance Co. (Fla. 2006) approving a construction of Section 627.428 which resulted in a denial of Attorney's Fees on Appeal "to a party that did not prevail".  Grider-Garcia, attached slipsheet Opinon at 4.

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Attorney's Fees Awarded in Florida After Appraisal, Suit, Payment.

    Universal Property and Casualty Insurance Company issued a Homeowner's Insurance Policy to Robert and Nancy Lewis in Florida.  Hurricane Wilma struck the Lewis's home in October, 2005, causing damage.  In 2006, over a year later, Universal contested Coverage.  Mr. and Mrs. Lewis hired a lawyer who sent Universal a courtesy copy of a draft complaint for First-Party Bad Faith. 

    Universal then reportedly demanded an appraisal.  The Lewises filed their lawsuit.  Without awaiting a Trial Court Order or Judgment confirming the Appraisal Award, "it is undisputed that the insurer paid the claim.  Florida law squarely holds that 'payment after suit was filed operates as a confession of judgment ... entitling [the insured] to attorney's fees.'"  Lewis v. Universal Property & Casualty Ins. Co., 34 Fla. Law Weekly D1104 (Fla. 4th DCA Case No. 4D08-2516, Opinion Filed June 3, 2009)(subscription required), link to the official report from the Court's web site here.  The quoted language is found on page 4 of the slipsheet opinion.  The Fourth District therefore held that "the insureds were entitled to an award of section 627.428 attorney's fees" in that case.  Id. at 5.

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"Unclean Hands" Bar to Advancement and Payment.

    A former officer of a corporation sued the corporation for its allegedly wrongful refusal to advance the officer's defense expenses under the bylaws of the corporation in  Download Tafeen v. Homestore, Inc. (Del. Ch. April 27, 2004)..  (Director's and Officer's Insurance Policies also usually provide for advancing the officers' defense expenses, although under the typically worded "fraud" Exclusion in such Policies the Insurance Company raising that Exclusion may have to await the outcome of the underlying litigation.)  The corporation defended these allegations with the defense of unclean hands among other defenses.

    The officer's complaint contained allegations that the underlying litigation in which the officer incurred defense expenses including attorney's fees included 6 listed lawsuits in California in which he and the corporation were sued by insurance companies.  Testimony in the Court File "revealed that [the corporation] had overstated its revenues" during the period that the officer was employed there, and that while other officers were "being prosecuted in connection with similar overstatements," the officer (who was then no longer only an employee but had apparently assumed a corporate office) "purchased a home in Florida" with a purchase price of $1.45 Million.  Id.  The Court of Chancery Judge in this case held that the facts in the record presented a triable issue of fact on the officer's "intent in buying the house" which was central to the corporation's defense of unclean hands.  Id.

    Unclean hands has even more recently been held a good defense to a Count for alleged breaches of a Settlement Stipulation and Order entered as part of a divorce decree.  The defendants included an ex-husband and a corporation.  The Settlement Stipulation and Order included personal guarantees from the ex-husband who thereby also agreed to obtain corporate guarantees (apparently later given to the plaintiff) and also a consulting agreement between the corporation and the plaintiff in  Download Medek v. Medek (Del. Ch. Sept. 10, 2008)..

    The defendants alleged "an undisclosed agreement" between the plaintiff and her ex-husband defendant, whereby the plaintiff allegedly was paid $150,000.00 "to focus her efforts to recover her claimed damages on" the other defendants.  Id. In this case, the Vice Chancellor of the Court of Chancery of Delaware ruled that the resulting defense of unclean hands was "closely interrelated" to these allegations and presented a triable issue of fact there, too.  See id.

    In addition to equitable remedies previously outlined here against persons allegedly receiving Federal Taxpayer Funds in inequitable ways, equity provides defenses to not paying such persons in the first place.  Equity has always provided those defenses.  One of them is the equitable defense of unclean hands.  Clearly, that equitable defense is alive and well.

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Arbitrary? Capricious? Katrina?

     Delay or denial of covered claims can give rise to an Insurance Company incurring liability to pay all sorts of penalties, assessments, attorney's fees, and other damages outside of the contract of insurance.  A recent case, pending a motion for reconsideration at the time of this post, contains the holding that whether or not a refusal to pay a Renter's Insurance Claim in New Orleans after Hurricane Katrina is arbitrary, capricious or without probable cause depends on the facts known to the Insurance Company at the time of its action.  Aronson_v. State Farm Fire & Casualty Co. (La. Ct. App. 4th Cir. Case No. 2007CA0573, Opinion Filed October 10, 2007).pdf at page 15 of the linked Official Opinion from the Court's publicly accessible web site; also available by subscription as 2007 WL 3015571 at *7.  The currently available opinion reports the record facts in some detail that supported both the Trial Court's decision and the Appellate Court's decision that in this case, there was an arbitrary and capricious refusal to settle an insurance claim at the time the Insurance Company failed to reconsider its denial of a Renter's Claim after it had been told that it had already paid an Owner's Insurance Policy Claim based on damage caused by Hurricane Katrina to the same duplex in New Orleans.

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Attorney's Fees and Florida PIP ... And Wait Till Next Year!

     Personal Injury Protection ("PIP") benefits are generally available under Automobile Insurance policies issued in the United States.  In Florida, PIP benefits were scheduled to permanently expire when the statute requiring them "sunset," or expired,  on September 30, 2007.    The Florida Legislature  passed a reauthorization of the Florida PIP statute on Friday, October 5, 2007--effective, however, on January 1, 2008.  It is difficult to find a link to this new statute which was passed three days ago at the time of this post.   Link  here  to the "enrolled" bill which appears to be a compromise Florida Senate and House Bill 13.

     New subsection (15) of Section 627.736 is of special interest.  It is found on page 85 of 89 pages on the attached link.  Subsection (15) regulates awards of attorney's fees.  In some cases, there will be no attorney's fees awarded at all under this new statute.

     Here is how it is written.  How it will work will depend on the Florida Courts.  Whenever a claimant files a lawsuit against the Insurance Company under Section 627.736 to recover PIP benefits allegedly due and owing under the Insurance Policy, the new provision purports to bar attorney's fees awards when there is a claim that "should have been brought in a prior civil action" but was not brought before, AND "the court determines" that to be the case. 

     The same new Subsection 627.736(15) also provides that "all claims related to the same health care provider for the same injured person shall be brought in one action," ordinarily.  In other words, at least one of the times when the Legislature was of the view that a PIP claim "should have been brought in a prior civil action," is whenever there was a previous claim for PIP benefits "related to the same health care provider for the same injured person".   Parenthetically, Section 627.736 did not convey a statutory definition of "health care provider" before or after the new provision was enacted.

     Whether there are any other times that a "court determines" that a lawsuit "is filed for a claim that should have been brought in a prior civil action," is of course also for the Courts to determine.

     In the interim, the Florida PIP statute was recently reenacted to take effect next year.

                                                      

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