On Tuesday, July 22, 2008 the Governor of California signed a bill into law that prohibits Health Insurance Companies from awarding bonuses to their employees based on canceling or rescinding a Policyholder's-Patient's Health Insurance Coverage. Lisa Girion, "Schwarzenegger Signs Ban on Health Insurers' Rescission Reward Practice" (Los Angeles Times Online, Wed., July 23, 2008).
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The State of California's Department of Managed Health Care has reached an agreement with two of the larger Health Insurance Companies in California, Blue Cross and Blue Shield, to resolve complaints investigated by the Department about the Companies' alleged "post-claims underwriting" practices. Lisa Girion, "California Fines Two Health Plans $13 Million" (Los Angeles Times Online, Friday, July 18, 2008). By those practices the Health Insurance Companies allegedly attempted to rescind Health Insurance Policies for supposed misrepresentations made in the application at the beginning of the underwriting process, after the Policyholder made a claim for a lot of Health Insurance Benefits under the Policy. The agreement includes these features:
1. Payment of a fine. The two Health Insurance Companies together agreed to pay $13,000,000.00 or $13 Million in fines, $10 Million by Blue Cross and $3 Million by Blue Shield.
2. Payment of amounts which most lawyers would view as "consequential damages" or money for damages that are a consequence of the alleged unlawful actions. No amount was reported, but instead a "process" was agreed to by which former Policyholders could "recover medical expenses they paid out of pocket after they were dropped as well as other damages, such as homes or businesses that were lost because unpaid medical debts ruined the former members' [i.e., Policyholders'] creditworthiness."
3. Offer of new policies. Both Blue Cross and Blue Shield agreed to offer new policies to certain of their Policyholders whom they canceled since 2004.
4. Finally, both Companies agreed to write new application forms that would somehow be "easier for consumers to understand."
The Director of the California Department of Managed Health Care is quoted in the article as saying that the fine is a record. On the other hand, the Director of healthcare policy for "Consumer Watchdog" is also quoted in the article as saying that the agreement is "'obstructing justice'".
In related developments, the Los Angeles City Attorney is pursuing his own previously filed lawsuit based on accusations of false advertising, unfair practices, and using intentionally misleading application forms, also reported by Lisa Girion, "Blue Shield Sued for Allegedly Lying About its Coverage" (Los Angeles Times Online, Thursday, July 17, 2008). The president of the California Medical Association and the president-elect of the Los Angeles County Medical Association are both identified in this article as praising the efforts represented by this lawsuit against these alleged rescission practices directed at Health Insurance Policies. On the other hand, a spokesperson for Blue Shield announced that it has 400,000 "individual policyholders," that Blue Shield has paid "nearly $4 billion in claims for those policyholders" since 2002, that Blue Shield's application forms "were reviewed and approved by two state regulators," and that its investigative and underwriting practices are in essence top notch, which he said, "'is why we have rescinded a fraction of 1% of individual and family policies.'"
Not to be outdone, perhaps, the United States Congress has reportedly scheduled hearings on the accusations that Health Insurance Companies engage in post-claims underwriting or rescission of certain Health Insurance Policies. Avram Goldstein, "U.S. to Probe Health Plans That Cancel Sick Members (Update 3)" (Bloomberg.com, Thursday, July 17, 2008). It is noteworthy that, according to this article, the Health Insurance Policies that are the alleged targets of rescission are only Health Insurance Policies issued to individual persons.
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Current market conditions strongly reflect significant risk. In this situation, Insurance Coverage Issues and Claims are inevitable. They are coming. They are coming under all sorts of Insurance Policies. These Insurance Coverage Issues and Claims will in turn trigger many accusations that Insurance Companies and others acting in Fiduciary settings did not act in Good Faith and Deal Fairly. In a climate like this one, these Issues and Claims are inevitable. See generally Peter G. Gosselin, "In This Economy, Failure is an Option" (Los Angeles Times Online Sunday, July 20, 2008).
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... The Same Day Florida's First District Court of Appeal Denied Rehearing of its Opinion Upholding O.I.R.'s Order Suspending New Allstate Policies.
Press reports published on Saturday, May 17, 2008 made it appear that the Florida Office of Insurance Regulation (O.I.R.) lifted its suspension on new Allstate Insurance Policies on Florida on the day before, or Friday, May 16, 2008. As you will recall, the O.I.R. issued its Suspension Order in the first place because Allstate failed to comply with O.I.R. subpoenas for various groups of documents including unauthorized Catastrophe Computer Models purchased by Allstate in connection with its Premium Rate Increase requests.
According to the O.I.R., it announced a stay of its Suspension Order on Wednesday, May 14, 2008, immediately after the Florida appellate court denied rehearing of its Opinion upholding the O.I.R. Order. The reason given by the O.I.R. was its receipt of a sworn affidavit from Allstate "certifying that it has complied with Florida law by freely providing all documents requested" by the O.I.R. See Florida Office of Insurance Regulation Press Release, "Florida Insurance Commissioner McCarty Stays Allstate Suspension, Continuing Compliance Required," Wed., May 14, 2008.
Dennis Wall, Chair of the Insurance Law Committee, will speak at the Orange County Bar Association Center in Orlando, Florida about Preparing for Hurricane Insurance, on Wednesday, May 21, 2008 from Noon to 1:00 P.M. The Orange County Bar Association Center is located at 880 North Orange Avenue in Orlando, Florida.
You are cordially invited to attend this free public event. Hope to see you there.
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Dennis Wall, Chair of the Insurance Law Committee, will speak at the Orange County Bar Association Center in Orlando, Florida about Preparing for Hurricane Insurance, on Wednesday, May 21, 2008 from Noon to 1:00 P.M. The Orange County Bar Association Center is located at 880 North Orange Avenue in Orlando, Florida.
You are cordially invited to attend this free public event. Here is a link to the "EVENTS" published about this presentation by the Orlando Sentinel on Monday, May 19, 2008 on page C3, col. 1, in "The Law & You" Section.
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The credit crisis has reportedly already hit Hurricane Insurance like, well, like a Hurricane, even before the first 2008 Hurricane hits. The credit crisis, and the related and overwhelming number of houses that are either in foreclosure now or are predicted to be in foreclosure proceedings soon, are the reported culprits in an anticipated post-Hurricane Catastrophe. Local and State Governments, and Insurance Companies, may have to rely on bond markets if they all run out of money paying Hurricane Claims during and after Hurricanes may strike in 2008, it is reported in "Credit Crunch Could Restrict Post-Hurricane Help" (St. Petersburg Times Online, Monday, May 19, 2008). The source announced in this newspaper report is a report issued by A.M. Best, which excluding the news media perhaps, has an established policy of releasing its usually copyrighted reports to those who pay for them.
On Wednesday, May 21, 2008, Dennis Wall, Chair of the Insurance Law Committee, will present "Preparing for Hurricane Insurance" at the Orange County Bar Association in Orlando, Florida. He will discuss these and other major developments affecting Hurricane Insurance Preparation before the 2008 Hurricane Season. This presentation is open to the public and there is no charge. It is offered by the Insurance Law Committee beginning at Noon and scheduled to run through 1:00 P.M. at the Orange County Bar Association Center, 880 North Orange Avenue, in Orlando, Florida. As a reminder: In Florida, the 2008 Hurricane Season officially begins on June 1, 2008. There is no better time to begin preparing. Please Read The Disclaimer.
Some adjusters at certain Insurance Companies are reportedly overzealous in referring their Companies' Policyholders to Social Security if the Policyholders file for Health Insurance benefits or Worker's Compensation Insurance or similar Insurance benefits.
In more cases than may reportedly be appropriate, they require their Claimants-Policyholders to apply for Social Security benefits, in some instances reportedly even if the Claimants-Policyholders are not eligible for Social Security benefits.
In the interim, these same few adjusters reportedly keep both the number of Claims and their Company's Insurance Policy Payments down. This recent newspaper reporting on these allegations of Claims, and Payments/Nonpayments is a result of "lawsuits filed by whistle-blowers" in the wake of such matters: Mary Williams Walsh, "Insurers Faulted as Overloading Social Security" p. A1, col. 6 (New York Times Nat'l Ed., Tuesday, April 1, 2008).
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After many long battles, Allstate reportedly has released the famous McKinsey Report. It has allegedly guided its claims handling practices balanced against its production of profit. Erik Holm & Josh P. Hamilton, "Allstate Releases McKinsey Records Sought by Critics (Update 2)" (Bloomberg.com, Friday, April 4, 2008).
The documents released by Allstate as the McKinsey Report are said to total 150,000 pages. More to come on what they contain.
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Florida's First District Court of Appeal issued its Opinion on Friday, April 4, 2008 upholding an Order suspending Allstate's authority to transact new business in Florida: Download Allstate_v. Office of Insurance Regulation (Fla. 1st DCA Case No. 01D08.0275, Opinion Filed 04.04.08).pdf. See the posts in this space through January 24, 2008 to understand the leadup to this event. In basic and simple terms, the saga began in the Fall of 2007 with subpoenas by the State of Florida Office of Insurance Regulation, Allstate's refusal to produce the requested materials at an O.I.R. Hearing in January, 2008, and the O.I.R.'s immediately resulting Order suspending Allstate's authority to conduct new Insurance business in Florida.
The Order was issued by the Florida Department of Insurance or Office of Insurance Regulation. The Order, termed an Immediate Final Order or IFO, "immediately suspended Allstate's Certificates of Authority to transact new insurance business in Florida. The suspension would terminate upon Allstate producing documents OIR previously subpoenaed in an investigation of Allstate's insurance practices."
The Florida Appellate Court held that OIR was within its rights to issue this narrowly tailored Order to enforce its own subpoenas. Allstate v. Office of Insurance Regulation, attached official Opinion of the Court, at 2. The OIR Order is narrowly tailored because it "was limited in scope." Id. at 13. The OIR could have issued an Order suspending any Allstate business, the First District appellate panel unanimously wrote. "In limiting the scope to suspension of new business, OIR's action mitigates the potential harm from Allstate's alleged insurance practices while still allowing Allstate to service existing policies." Id.
The documentation Allstate refused to produce -- and all 30,000 documents Allstate did produce were each and every one labeled "Trade Secret" -- were in response to subpoenas "in connection with OIR's investigation of Allstate's relationship with risk modeling companies, insurance rating organizations, trade associations and compliance" with legislation concerning Premium Rate Increases passed at the 2007 Special Session of the Florida Legislature. Id. at 2-3.
The Order in question was issued by the OIR in response to Allstate's refusal to produce almost all of the documents actually requested by the OIR and "Allstate's 51 pages" of objections. Id. at 6.
The First District's decision was to affirm and immediately lift its earlier stay of the OIR Order. Allstate in its many manifestations which are parties to the appeal -- e.g., Allstate Floridian, Allstate Indemnity, Allstate Property & Casualty, Allstate Insurance, etc. -- has time if so advised to file a Motion for Rehearing and possibly to seek appellate review in the Supreme Court of Florida.
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Frustrated by the famed Anti-Concurrent Cause Exclusion by which damages caused in part by an Excluded Peril and in part by a Covered Peril are totally excluded from Coverage, some Members of Congress propose adding "wind" coverage to the National Flood Insurance Program. The idea is resisted by Insurance Companies, among others. See Jeffrey H. Birnbaum, "Storm Brews Over Adding Wind Coverage to Federal Flood Program" (washingtonpost.com, Tuesday, March 25, 2008).
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