On June 27, 2008, the United States Supreme Court denied review in the case of Amschwand v. Spherion Corp., No. 07-841. In this author’s opinion, the Supreme Court should have accepted cert, and should thereafter have overturned the lower court’s decision in the case.
The question presented in Amschwand was whether an action by a plan beneficiary against a plan fiduciary for monetary relief equal to the insurance benefits that the beneficiary would have received absent the fiduciary’s breach of fiduciary duties seeks “equitable relief” within the meaning of ERISA §502(a)(3). To understand the question presented, a review of the facts is necessary. Mr. Amschwand was employed by Spherion Corp. and was a participant in Spherion’s group life plan, which was insured by Aetna Life Insurance Company. In 1999, Amschwand was diagnosed with cancer and took leave from his job. (more…)
On June 19, 2008, the Supreme Court issued its decision in Glenn v. Metropolitan Life Insurance Co., No. 06-923, 2008 WL 2444796. The Court was asked to address the issue of the conflict of interest which exists when the entity that administers an ERISA plan, such as an insurance company, is also the entity which pays the benefits out of its own pocket. The Supreme Court confirmed that a conflict of interest exists in such a situation and the court must consider the conflict or at least be “weighed as a factor” in determining whether the denial of an employee’s claim for benefits was proper. The court in Glenn found that MetLife, as plan administrator, engaged in a dual role of both evaluating and paying benefit claims which creates the kind of conflict of interest previously referred to in the Supreme Court’s decision of Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). Unfortunately, the ERISA statutory scheme failed to contain an express standard of review for the courts to follow in reviewing a beneficiary’s denied claim. Pursuant to Firestone, the court found that a denial of benefits challenged under ERISA § 502(a)(1)(B) must be reviewed under a de novo standard unless the benefit plan expressly provides the plan administrator or fiduciary (often times the insurance company) with discretionary authority to determine eligibility for benefits or to construe the plan’s terms, in which case a deferential (or arbitrary and capricious) standard of review would be appropriate. Ever since the court’s ruling in Firestone in 1989, the district and circuit courts have struggled with the proper application of this arbitrary and capricious standard of review. The hope was that the Supreme Court would clarify the appropriate standard of review in those case where discretionary authority had been granted to a fiduciary and such fiduciary was acting under a conflict of interest. The new Glenn v. MetLife decision clarifies this approach somewhat and, in this author’s opinion, serves to overturn the 10th Circuit’s approach as set forth in Fought v. Unum, 379 F.3d 1997 (10th Cir. 2004). (more…)
We just learned this morning that Governor Ritter signed into law House Bill 1407 yesterday afternoon which has the ability to dramatically assist beneficiaries/insureds of insurance contracts, including those governed by ERISA. Generally speaking, the bill provides specific rights and remedies to insureds under insurance contracts whose claims have been unreasonably delayed or denied. Specifically, such a finding can result in the recovery of reasonable attorney’s fees and up to two times the actual damages sustained. See C.R.S. §10-3-1116, as now amended.
Additionally, the law bans the use of “discretionary clause” provisions within any insurance policy, including group policies. (more…)
A nice win in a case against Standard Insurance and PERA.
On Friday, May 16, 2008, the Colorado Court of Appeals issued a decision of first impression which addresses Standard Insurance Company’s long pursued argument that it is entitled to governmental immunity in administering claims for disability retirement benefits for the Colorado Public Employees Retirement Association (PERA). Click here for a link to our website which describes PERA benefits in more detail. Our office has handled many of these claims and faced this argument by Standard on more than one occasion. Until now, the Court of Appeals had not been presented with the legal question of immunity, but, now that it has, it has answered the question correctly. Standard Insurance does not have immunity and may be sued directly.
In the case of Moran v. Standard Insurance Co., No. 06CA2081, the Plaintiff appealed the trial court’s finding that Standard was an “instrumentality” of PERA and (more…)
Often times, both potential clients and inexperienced attorneys will contact our office and are surprised to learn that insurance bad faith claims cannot be pursued when a group insurance policy is governed by Employee Retirement Income Security Act of 1971 (For a more detailed summary of “ERISA” click here). A group insurance policy obtained through an employer, such as a long term disability income replacement policy, looks like an ordinary policy but is not treated as such in the eyes of the law. That is because it is a group policy provided to an individual by his or her employer, and is thus governed by ERISA. (more…)
On November 30, 2007, the 10th Circuit Court of Appeals issued the decision in Jewell v. Life Ins. Co. of North America, 2007 WL 4218919. In this case, Mr. Jewell was seeking long term disability benefits through a group policy purchased with LINA (CIGNA) on behalf of the employees of Sprint Telecommunications. Mr. Jewell was suffering from severe headaches, dizziness, panic attacks, and depression. His benefits were denied under the policy’s mental illness limitation. After the lawsuit was transferred to federal court, the attorney for Plaintiff sought to introduce two additional opinions from Plaintiff’s physicians. Whether or not additional evidence can be presented following the insurance company’s determination of a claim is dependent upon the standard of review the court is to apply. If discretionary authority has been granted to the insurance company, the “arbitrary and capricious” standard of review will be applied by the trial court. If discretion has not been granted, the court’s review is “de novo” (of new). The Jewell decision addresses the admissibility of evidence in a de novo proceeding, and, (more…)
Each year, Colorado’s General Assembly amends the Colorado Worker’s Compensation Act. The changes in 2007 are critical in many respects. They are highlighted below.
Senate Bill 07-258
• Slight changes to worker’s compensation evidentiary hearings specific to notice, time schedule, evidence and orders;
• Increases the aggregate of all lump sums granted to $60,000, from the old maximum of $37,560;
• Requires automatic payment of up to $10,000 in a lump sum for both scheduled and non-scheduled awards.
House Bill 07-1297
• Increases the award for disfigurement to a maximum of $4,000, and an award of up to $8,000 for extensive facial or body scars, burn scars, or stumps resulting from loss of limbs.
House Bill 07-1008
• Creates a presumption of an occupational disease for a disability, death, or impairment suffered by a fire fighter which results from certain types of cancer.
House Bill 07-1176
• Affords a claimant the opportunity to select a treating physician from a list of at least two physicians or provider systems designated by the employer. Previously, the Respondent selected the authorized treating physician with no choice being offered to the injured worker;
• Allows the claimant a one-time change of position to a physician or provider on the employer’s designated list. This changes in addition to the existing procedure which allows the claimant to request a change of physician at any time with permission from the insurer.
House Bill 07-1366
• Requires that a person contracting construction work on a construction site either provide or require proof of worker’s compensation insurance coverage for every person performing construction work on that site;
• Does not apply to independent contractors who have formed corporations and have rejected coverage; corporate officers and members of limited liability companies who have rejected coverage; owners, occupants (or both), of a qualified residence who contract work to be done by a person not in their employ; owners, occupants (or both), who contract for routine repair or maintenance.
On December 13th, California Insurance Commissioner Steve Poizner announced his intent to seek $12.6 million dollars in fines and penalties against insurer Blue Cross Blue Shield based upon the results of a Market Conduct Examination. The examination revealed extensive violations in claims handling and improper rescissions.
Among these violations, the examination found Blue Cross had not paid claims in a timely manner; failed to maintain all documents and notes in the claim file; failed to pay interest when required to do so; misrepresented the coverage available under a policy by, in some instances, including misleading ERISA language in non-ERISA policies; sought immaterial information or information already in its possession in handling claims; failed to engage in prompt and fair settlement of claims after liability was established; and failed to complete medical underwriting after receiving the application for insurance, among other violations.
Commissioner Poizner took a strong position against these practices, stating, “[l]et this be a message to all health insurers that we will not tolerate irresponsible rescissions and shoddy claims handling. We will target this behavior on an industry-wide basis and continue to take appropriate action as needed.” You can read the Market Conduct Examination here and can read a copy of the California Department of Insurance press release here.
Heather L. Petitmermet
Blog Author
During Colorado’s most recent legislative session, a new law was added to the books which will effectively increase a Colorado insured’s limits under their Uninsured or Underinsured (UM/UIM) motorist coverage. To refresh yourself on the nature of UM/UIM coverage please click here.
Prior to this legislative change, the coverage available to an injured party in Colorado under their UM/UIM coverage was reduced by the amount of money paid to him or her by the responsible party’s Bodily Injury insurance carrier. As an example, if your policy provides for the minimum limits of $25,000 per person/$50,000 per accident underinsured motorist coverage, but you have received the limits of the responsible driver’s insurance policy which were also $25,000/$50,000, then no claim existed under your UM/UIM feature of your own insurance policy. However, starting in 2008, the UM/UIM carrier is no longer entitled to offset amounts of money the injured insured received under another policy. In the scenario above, the total available under all insurance policies effectively increases to $50,000/$100,000, if your injuries and losses justify the recovery of course. This new law only applies to policies issued or renewed after the January 1, 2008 effective date.
We have always counseled our clients that UM/UIM coverage is perhaps the most important type of coverage to be purchased on your automobile policy. While Bodily Injury (BI) protection is required by law, an insured in Colorado may reject UM/UIM coverage in writing. In our opinion, this would be a mistake. UM/UIM coverage is typically the least expensive type of coverage you can obtain on your policy and effectively insures every other driver out on the road who either does not have insurance or does not have enough insurance. We recommend that you purchase BI and UM coverage limits of at least $100,000/$300,000, even more if you are able to do so.
Often times, insurance policies contain enforceable provisions that may dramatically differ from one’s expectations, especially if the insured has not reviewed th policy in detail. For instance, many health insurance policies contain “subrogation clauses” which provide the insurer the ability to be reimbursed for medical expenses paid pursuant to the insurance policy if the insured also recovers in a separate legal action against the party responsible for the insured’s injuries. Subrogation clauses can, in some instances, be limited by a common law principal called the “make whole” doctrine. Under the make whole doctrine, the health insurer would not be able to recover medical expenses unless the insured had been “made whole,” in other words, unless the insured had been compensated fully. Across the country, courts are split on the applicability of the make whole doctrine in the ERISA context.
The oft-stated purpose of the subrogation clause is to avoid double recovery to an insured; however, the practical effect is that many people are unable to be fully compensated for their losses. (more…)