Insurance Claims And Issues

Will Health Insurance Companies Reduce Coverage After Mandate?

   Caution flags are running up the flag pole.  If a Mandate passes the U.S. Congress that all persons in the United States shall have Health Insurance, thus delivering a bountiful pool of Policy Premiums to existing Health Insurance Companies, will the Health Insurance Companies nonetheless try to reduce the available Health Insurance Coverage?  Even without a "pre-existing condition" Exclusion?  See David S. Hilzenrath, "Discrimination by Insurers Likely Even With Reform, Experts Say/Economic Pressure Could Give Rise to New Biases Against Prior Conditions" (Washington Post Online, posted for Sunday, October 4, 2009).

   Focusing on only the supposed 'deletion' of the "pre-existing condition" Exclusion, there are three (3) ways in which Health Insurance Companies will or may try to reduce future Health Coverage, according to Experts consulted in the linked newspaper article:

   1.  Some or all Health Insurance Companies are expected to offer "free health-club memberships" to attract Policyholders.  Since ordinarily only healthy people will find the offer attractive, those Health Insurance Companies making this offer are more likely to insure healthy people and not people whose medical conditions tend to give rise to Health Insurance Claims.

   2.  Delaying or making difficult the payment and processing of Health Insurance Claims.  This may offer the promise of deterring Policyholders with medical conditions from purchasing or renewing their Health Insurance Coverage with Insurance Companies that engage in these sorts of settlement practices.  Although the existence of Good Faith and Fair Dealing requirements in local Insurance Law may seem to be a deterrence to engaging in unfair settlement practices, in general terms the Federal Statute, ERISA ("Employee Retirement Income Security Act") provides that penalties for improper denial of Health Insurance Claims falling under its protection are limited more or less to the amount of the denied payment.  Thus, in order to limit the Policyholder Pool to healthy people, an unchanged ERISA coupled with a Mandate for all persons in the U.S. to have Health Insurance, may actually provide an incentive to at least some Health Insurance Companies to engage in unfair claim settlement practices which are essentially immunized by ERISA.

   3.  Including in networks mainly general practice physicians and few specialists.  Potential Policyholders with medical conditions requiring specialized treatment would then be likely to gravitate to Health Insurance Companies offering Plans which provide networks of specialists who can treat the Policyholders' medical conditions, and away from Health Insurance Companies which do not offer such Plans and networks.

   Time will tell.

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APPEAL IN Maldonado CASE: POSTED 07.23.09.

  The Maldonado decision of the Southern District of Florida, posted here on July 23, 2009, was affirmed by the Eleventh Circuit Court of Appeals in Download Maldonado v. First Liberty Insurance Corp. (11th Cir. Opinion Filed August 17, 2009).

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Asset Affidavits and Bad Faith, or Not, in Settlement.

    A demand for an "asset affidavit" as part of a demand for settlement was the center of attention in the District Court in Maldonado v. First Liberty Insurance Corp.,  546 F. Supp. 2d 1347 (S.D. Fla. 2008)(subscription required), click here for the Official Report:  Download Maldonado v. First Liberty Insurance Corp. (S.D. Fla. Opinion Filed April 22, 2008).  The Online Docket of this case reveals that a Notice of Appeal has been filed.

    The settlement demand in that case included a not-uncommon demand for an affidavit executed by the insureds stating that the insureds had no assets other than the insurance coverage.

    The insureds refused to provide that affidavit.

 

    The defendant Liability Insurance Company informed the insureds of the settlement  demands several times, and of the consequences if the demands were not met, and of the Insurance Company's unsuccessful tenders of the policy limits in exchange for the insureds' full release, and of the exposure which would face the insureds without such an affidavit in response to the settlement demand, and also that the Liability Insurance Company had requested that the insureds be allowed instead to provide an affidavit in a form which would meet the privacy concerns expressed by the insureds as their reason for refusing to execute it, and that the opposing attorney had refused to do that. 

     These record facts resulted in a summary judgment of no Bad Faith:

First Liberty ... at all times recognized the liability of its insured and was, therefore, ready to settle for the policy limits, expressing to all those involved its willingness to settle, and did not settle only because of the conduct of its own insured.  As a matter of law, there was no bad faith on the part of First Liberty.

Download Maldonado v. First Liberty Insurance Corp. (S.D. Fla. Opinion Filed April 22, 2008) see attached Offiicial Slipsheet Opinion at 17.

 

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Health Insurance: Coverage, Claims, Rescission.

    What some term "post-claims underwriting" has been the subject of previous posts.  The term refers to Rescission of Life Insurance Policies and of Health Insurance Policies after large Claims are made on the policies.  The usual Rescission action by an Insurance Company under one of these Policies involves a misrepresentation of material information in the application.  If the Rescission is successful, the Policy is voided as though it never existed, the Policyholder receives the entire Premium back, and the Claim is not paid under that Policy.

    Reportedly, three Health Insurance Companies whose CEO's testified recently to a U.S. House of Representatives subcommittee about Rescission had thereby "canceled the coverage of more than 20,000 people, allowing the companies to avoid paying more than $300 million in medical claims over a five-year period."  Lisa Girion, "Health Insurers Refuse to Limit Rescission of Coverage" (Los Angeles Times Online, Wed., June 17, 2009).

    It is pretty clear that Rescission does not appear as an option in most instances until a Claim is made on the Policy.  Until a Claim is made on the Life Insurance or Health Insurance Policy in question, there is simply no reason for the Insurance Company to more closely scrutinize the information on the application that led to the Policy being issued in the first place.  If the application survives that scrutiny, there ordinarily should be no Rescission; if the application does not survive that closer scrutiny, then there may be a Rescission action taken or filed by the Insurance Company.  Either way, the Claim is usually the triggering event for closer scrutiny of the application.

    On the other hand, Life and Health Insurance Companies often say that they look at Rescission as a weapon against intentional misrepresentation and fraud.  Yet, when asked point-blank at the House Subcommittee Hearing recently if they would be willing to limit their Rescission actions to intentional misrepresentation, each of the Insurance Company CEO's said, "No."  Id.

    One Member of Congress is quoted in the linked article as observing that "[t]his is precisely why we need a public option."  Id.  

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Successful Handling of Insurance Claims and Coverage Disputes.

    Successful outcomes in handling Claims and Insurance Coverage disputes owe a lot to experience.  Share your experience and leave a Comment Online on the Claims Magazine web site through this link to a recent article about Claims Handling co-authored by Dennis J. Wall and by W. Michael Latzo of Generali (Retired), Handling Construction Defect Claims (June, 2009).  Your Comments will be gratefully appreciated by the Authors and by all who read them.

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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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Property Insurers' Agenda Increases Premiums of Florida House.

    Property Insurance Companies' proposed legislation passed the Florida House.  The bill awaits the Florida Senate and the Governor.  Among other long-sought features, the Property bill would:

• Increase Citizens Property Insurance Company Premiums by 10% per year.
• Enable a Commission to recommend elimination of all or most of the Premium discounts for Hurricane Mitigation measures recently enacted into Florida Law -- measures to strengthen the construction of Florida Homes that were recently demanded by Property Insurance Companies.
• Increase Property Insurance Premiums including Homeowner's Insurance Premiums apparently, by 10% per year.
• Restrict Policyholders and other Insureds on adjusters they hire for assistance on their Homeowner's and other Property Insurance Claims, and enable another Commission to recommend more restrictions.

The potentially biggest feature of this bill even when it is put alongside these other very big features?  "Gradually reduce the $29 billion Florida Hurricane Catastrophe Fund by $12 billion."  Julie Patel, "Rates Would Rise Under Legislation/Florida House Passes Sweeping Property Insurance Bill" (South Florida Sun-Sentinel.com, Friday, May 1, 2009).

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At the 2009 RIMS Annual Conference in Orlando ....

.... RIMS is the Risk and Insurance Management Society.

Rumor has it that the Insurance Companies within the AIG Group have improved at paying claims, but accounts differ on how much they have improved ....

No expense of any kind has been requested for this announcement by any person or corporation.

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Guiding Principles for Claims Handling.

    For a long time, Insurance Companies issuing Insurance Policies of all kinds have attempted to write "Guiding Principles" for handling insurance claims in Good Faith.  It is to their credit that they have done so.

    These written Principles may often be a guide to standards of handling claims in either third-party cases, which involve liability insurance claims,  see First State Insurance Co. v. Utica Mutual Insurance Co., 870 F. Supp. 1168, 1176 n. 17 (D. Mass. 1994), aff'd mem., 78 F.3d 577 (1st Cir. 1996):  Download First State insurance Co. v. Utica Mutual Insurance Co. (D. Mass. 1994), affd mem., or in first-party cases involving the policyholder's own claim under her, his or its own policy of insurance.  See Glassalum International Corp. v. Albany Insurance Co., 2005 WL 1214333 *4 (S.D.N.Y. May 23, 2005)(case involved claims for Property Damage resulting from Hurricane)(subscription required for Westlaw):  Download Glassalum International Corp. v. Albany Insurance Co. (S.D.N.Y. May 23, 2005).  See Appendix 8, Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Thomson-West Publishing Co., Third Edition in progress).

A corresponding post on this same subject can be found at "Insurance Claims and Bad Faith Law Blog" at www.insuranceclaimsbadfaith.typepad.com.

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Risk Management Lost: Part II.

    This follows a recent previous post about the role of Risk Management in the financial fiasco.  To that previously posted list of ways to have a financial breakdown, including in Insurance, should be added:

       It is not good risk management to silence Risk Managers, even if they appear to be "critics" of a Corporate profit center.

        It is also not good risk management to silence other people whose feedback is essential to the Risk Managers' evaluation of risk, which is one of the things that only Risk Managers do.

See also Gretchen Morgenson, "How the Thundering Herd Faltered and Fell/Merril Lynch Couldn't Escape the Housing Crash" p. 1, col 1 (New York Times Nat'l Ed, SundayBusiness Section, Sunday, November 9, 2008).

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