McKennon Law Group, Author at McKennon Law Group

In a victory for health insurance policy holders over health insurers/health care service plans, in Kaiser Foundation Health Plan, Inc, v. Superior Court (Rahm, et al, Real Parties), 2012 Cal. App. LEXIS 138 (Cal. App. 2d Dist. Feb. 15, 2012), the Court of Appeals ruled that a plaintiff does not need to obtain approval from the trial court before asserting a claim for punitive damages against a health care service plan. Specifically, the Court ruled that California Civil Procedure section 425.13 applies only to health care providers (such as doctors), but does not apply to health care service plans such as Kaiser Foundation Health Plan or Anthem/Blue Cross.

The Rahm family filed a lawsuit against Kaiser Foundation Health Plan and two Kaiser health care providers. The Rahms claimed that Kaiser improperly delayed before ordering an MRI for their daughter Anna, resulting in the eventual loss of Anna’s right leg and portions of her pelvis and spine. Specifically, despite numerous requests by Anna’s parents that Kaiser authorize an MRI for Anna, Kaiser refused. As a result, there was a considerable delay in discovering that Anna was suffering from a “high grade” osteosarcoma, one of the fastest growing types of osteosarcoma. The delay significantly contributed to Anna’s poor prognosis and the need for the amputations.

After the Rahms filed their lawsuit, the defendants filed a motion to strike the punitive damages allegations. The defendants asserted that the Rahms failed to comply with California Civil Procedure section 425.13, which requires a plaintiff to obtain a trial court order before a claim for punitive damages can be asserted against a health care provider for damages arising out of professional negligence. The Rahms eventually dismissed their punitive damages claims against the two Kaiser health care providers. Accordingly, the Court only reviewed whether California Civil Procedure section 425.13 applied to claims against health care service plans.

The Court of Appeals indicated that “the text of the statute is unclear as to whether section 425.13 is intended to apply only to claims against health care providers, or whether it is intended to apply to claims against any type of defendant—including claims against health care service plans,” and thus turned to the legislative history. After reviewing the legislative history, as well as Central Pathology Service Medical Clinic, Inc. v. Superior Court, 3 Cal. 4th 181 (1992) in which the California Supreme Court considered the scope of claims subject to section 425.13, the Court held that section 425.13 does not apply to claims against health care service plans. Specifically, the Court noted that:

Defendants’ argument that section 425.13 may be applied to claims against health care service plans, rather than health care providers, is also in conflict with other sections of California code. Civil Code section 3428, subdivision (c) states that “[h]ealth care service plans … are not health care providers under any provision of law, including, but not limited to … Section[] … 425.13 … of the Code of Civil Procedure.” Likewise, Health and Safety Code section 1367.01, subdivision (m) clarifies that a health care service plan’s role in determining the medical necessity of a requested procedure “shall [not] cause a health care service plan to be defined as a health care provider for purposes of any provision of law, including … Section[] … 425.13 … of the Code of Civil Procedure.” The language of these statutes demonstrates a clear intent to exclude health care service plans from the procedures required under section 425.13.

Defendants have not cited a single decision that has applied section 425.13 to claims pleaded against a health care service plan or any other type of entity that was not a medical care provider.

In conclusion, the Court ruled that:

The legislative history of section 425.13 and various provisions in California code demonstrate that the procedural requirements described in the statute do not apply to claims against health care service plans. Because defendants admit that Kaiser Health Plan is a health care service plan, rather than a health care provider, the trial court did not err in refusing to strike the punitive damages allegations asserted against the Health Plan.

Based on this ruling, plaintiffs can assert punitive damage claims against health care service plan without first obtaining court approval and will therefore have an easier time holding entities such as Kaiser Foundation Health Plan or Anthem/Blue Cross liable for their actions.

In 2009, the California Court of Appeal in Bosetti v. The United States Life Ins. Co., 175 Cal. App. 4th 1208 (2009) addressed whether a two-year benefits limitation on disability insurance payments for “mental, nervous or emotional disorder[s]” could properly serve to limit benefits payable to an insured who was disabled from depression and anxiety, but who also complained of interrelated physical impairments. The California Insurance Litigation Blog summarized that holding, but basically, the Court ruled that the policy’s two-year mental limitation was ambiguous and an insured would reasonably expect that disabling depression arising from a physical condition, would not be subject to the limitation. (The Court also ruled that there was a genuine dispute regarding whether U.S. Life’s claim decision violated the covenant of good faith and fair dealing.)

The 2009 ruling reversed the summary judgment issued in favor of The United States Life Insurance Company in the City of New York (“U.S. Life”) and the matter was remanded for trial. After a presentation of the evidence, a jury ruled in Bosetti’s favor. However, U.S. Life filed two motions – for a judgment notwithstanding the verdict and for a new trial. While U.S. Life conceded that Bosetti demonstrated that her disability had a physical component, the insurer argued that she failed to prove that her physical symptoms had caused her disability prior to March 3, 2003 (the date she was terminated from her job). The trial judge granted both motions, and Bosetti filed another appeal.

In an unpublished opinion, the Court of Appeal considered the trial court’s ruling on both of the post-verdict motions. First, after reviewing the available record, the Court determined that the verdict in Bosetti’s favor was supported by substantial evidence, including specifically that her depression caused the disabling physical symptom of an increase in her fibromyalgia pain. Based on these facts, the Court reversed the trial court’s ruling on the motion for judgment notwithstanding the verdict. In reaching this conclusion, the Court of Appeal affirmed its earlier ruling that a limitation on coverage for “mental, nervous or emotional disorders of any type” does not apply if the insured‘s disability was caused, in any part, by her physical symptoms.

However, with respect to U.S. Life’s motion for a new trial, the Court of Appeal explained that the trial judge is afforded great deference and “an order granting a new trial `must be sustained on appeal unless the opposing party demonstrates that no reasonable finder of fact could have found for the movant on [the trial court’s] theory,’” Applying this standard, the appellate court affirmed the order granting a new trial after finding that there was also substantial evidence that would have supported a verdict in U.S. Life’s favor.

While the case was remanded to the trial court for a second trial, the Court of Appeal did not overturn its 2009 ruling, and thus Bosetti I and its position regarding mental disabilities with physical symptoms should still be considered good law.

Los Angeles – Noted Southern California insurance and business litigator Robert J. McKennon was featured in the “Southern California Legal Profiles” section of the January 2012 issue of Forbes Magazine in an article highlighting his experience as a top Southern California insurance and business litigation attorney.

Mr. McKennon and his firm are highlighted as the only insurance and business litigation attorney/firm in Forbes’ special focus on the Southern California attorneys. Mr. McKennon is lauded as a “widely recognized [] expert on life, health and disability insurance law” who has “extensively written and lectured nationally in the insurance field.” The article continues:

“After representing Fortune 500 insurers for 25 years at a large California law firm, McKennon realized he was destined to take that expertise to the policyholders when he consistently won evaluative mock trial verdicts against his insurer clients, the last four of which resulted in $17 million, $33 million, $250 million and $500 million verdicts from the jurors. All of them included punitive damages.”

“We mount aggressive litigation against even the most powerful adversaries. And we are not afraid to go to trial against them,” Mr. McKennon says about why he and his firm are successful.

The Forbes magazine story is the latest recognition for Mr. McKennon, who was also recently named as a 2012 Southern California super lawyer, an honor given to fewer than 5% of Southern California lawyers.

McKennon Law Group PC founding partner Robert J. McKennon was featured in January 2012 edition of Forbes Magazine. The article discusses Mr. McKennon’s rise to the top of Southern California’s insurance and business litigators.

Insurance Commissioner Dave Jones marked his first full year in office this week by looking back on the California Department of Insurance’s (CDI) major accomplishments during 2011. Some of these achievements were very important for insurance consumers. Here’s what his press release said:

“A little over a year ago, I took my oath as Insurance Commissioner and pledged to make my Administration one of action,” Commissioner Jones said. “I can confidently and proudly say that the Department has fully lived up to that pledge. We have achieved a number of critical successes on behalf of California’s consumers consistent with our vision to be the most effective consumer protection agency in the nation.”

Major Accomplishments of 2011:

Implementing Health Care Reform

The Patient Protection and Affordable Care Act (PPACA) signaled a new day for health care in America. Commissioner Jones has made it a priority of his Administration to implement health care reform.

Literally minutes after being sworn in, Commissioner Jones issued new regulations that require health insurers in the individual market to use a larger percentage of the premiums they collect from Californians to deliver actual medical care, instead of overhead and profit. Then Commissioner Jones successfully sponsored Senate Bill 51 (Alquist), holding health insurers selling to small and large businesses to a similar standard.

Commissioner Jones also issued regulations requiring health insurers to cover children with pre-existing conditions. These regulations will help thousands of California children get the care they deserve without sending their families into financial ruin.

Jones issued regulations preventing “medical rescissions” and establishing a notice and hearing process for consumers. He also oversaw CDI’s review of health insurance policies for conformance with health care reforms such as the elimination of lifetime limits on benefits and eliminating co-payments and co-insurance requirements for preventative services.

Fighting Excessive Health Insurance Premium Increases

The battle to prevent excessive health insurance rates escalated early in 2011 when health insurers proposed new rates that would have saddled consumers with annual cumulative premium increases of up to 87 percent. Although the Insurance Commissioner does not have the authority to reject excessive rate increases, Commissioner Jones was able to reduce health insurance premiums by $107 million this year by using existing, though limited, review authority.

Commissioner Jones continued the fight to obtain legal authority to protect consumers from excessive health insurance rate increases. He sponsored AB 52 (Feuer) which would give the Insurance Commissioner real authority to reject excessive health insurance rate increases. This authority currently exists for other lines of insurance including auto, homeowners, property, and casualty, and it is imperative to secure the same authority over health insurance. The bill cleared the Assembly and has made it through all Senate committees and is now eligible for a vote on the Senate floor in January.

Protecting seniors

Seniors, among the most vulnerable members of communities, often fall victim to predatory scams. Commissioner Jones succeeded in establishing some new protections for them. The Governor signed two important CDI-sponsored consumer protection bills that became law in January. AB 793 (Eng) is designed to stop insurance agents and brokers from exploiting those seniors who recently acquired a reverse mortgage, by inappropriately inducing them to tie up those same funds in unsuitable annuities or other products.

The second law, AB 689 (Blumenfield), more broadly protects seniors and others from the sale of unsuitable annuities.

Premium Rate Savings for Consumers

CDI received more than 7,000 rate, rule, and form filings for property and casualty lines of insurance through December 31, 2011. CDI rejected $50 million in rate increases sought by property and casualty insurers and on top of this obtained close to $398 million in rate decreases using the authority of Proposition 103, for a total annual savings going forward of $448 million for California ratepayers.

New Workers’ Compensation Pure Premium Benchmark

Recognizing the importance of providing timely and meaningful information to employers about workers’ compensation insurance cost trends, Commissioner Jones directed a revamping of the “pure premium” benchmark process. Pure premium is the portion of the workers’ compensation premium needed to cover the cost of claims. While the Commissioner does not set workers’ compensation insurance rates, each year the Commissioner is asked to recommend a pure premium benchmark which helps employers and insurers better understand cost trends in the market. Thanks to the new process established by Commissioner Jones, a pure premium benchmark was approved for the first time in three years, one which is tied to what is actually happening in the market.

Protecting Homeowners from Underinsurance

With natural disasters like wildfires an unfortunate fact of life in California, Commissioner Jones issued new regulations to protect homeowners from being underinsured. The regulations include setting appropriate disclosure standards for agents and brokers who sell homeowners’ insurance and estimate replacement costs.

Rooting Out Fraud

From January through December 2011, CDI’s Enforcement Branch racked up more than 784 arrests for crimes that included auto insurance fraud, fiduciary theft, embezzlement and workers’ compensation fraud. As a result, the courts ordered $13.2 million in restitution due to the investigative actions we took against brokers, agents and producers.

CDI also filed lawsuits against pharmaceutical company Bristol-Myers Squibb for showering doctors with illegal kickbacks to get them to write more prescriptions and against Sutter Hospitals for bogus anesthesia billings. Both of these proceedings show CDI’s deep commitment to go after fraud that causes undue financial strain on California’s health care delivery system.

Making Sure Life Insurance Benefits Are Paid to Beneficiaries

Commissioner Jones held a joint investigative hearing with Controller John Chiang into life insurer death benefit payment practices. The hearing revealed that life insurers with access to the Social Security Administration’s “Death Master File” are not using information about deaths to trigger payments to life insurance beneficiaries. Jones has opened, with other insurance regulators, an investigation of the 10 largest life insurance companies to determine whether they engaged in unfair practices in the payment of death benefits under life insurance policies and annuities.

Other Notable Achievements

•    Nine CDI-sponsored consumer protection bills were enacted, including bills to protect consumers from being unwittingly enrolled in life insurance “retained asset accounts” and to protect California businesses from being dragged at their cost to other states to resolve disputes with insurers;

•    The Commissioner approved a 12 percent average decrease in residential earthquake insurance rates; and a new component of earthquake insurance that allows homeowners to insure their personal property up to $2,500 without having to first meet the larger deductible requirements of the structure itself;

•    Jones initiated an enforcement action against Blue Shield of California for failing to comply with the California Mental Health Parity Act, and supported legislation, signed by the Governor, to require health insurers and HMOs to cover a proven form of treatment for Autism;

•    CDI issued guidance requiring health insurers to provide all financial documentation related to health insurance rate increases for review by CDI;

•    Commissioner Jones initiated review of medical malpractice rates paid by doctors, nurses, hospitals and clinics;

•    The Commissioner hosted two consumer summit meetings to solicit input from leading consumer organizations;

•    CDI initiated a pilot project in cooperation with the California Department of Child Services, encouraging California insurers to help make a significant difference in the lives of children by voluntarily agreeing to offset insurance benefit payments against delinquent child support payments;

•    The Commissioner initiated actions that can make progress on improving the environment by approving an auto insurer’s application for Pay-As-You-Drive auto insurance; conducting a Green Insurance Summit; and leading efforts at the National Association of Insurance Commissioners (NAIC) to measure the extent to which insurance companies are responding to climate change and global warming;

•    Commissioner Jones also sponsored legislation signed into law to extend the sunset date on the California Organized Investment Network’s (COIN) Tax Credit Program to January 1, 2015. This program encourages investment in underserved communities;

•    CDI successfully took over a troubled workers’ compensation company (Majestic Insurance), developed a rehabilitation plan, and transferred the financially troubled company and its business to a healthy insurance company, with no interruptions in coverage for policyholders.

“We have made significant progress for consumers this year,” Jones said. “I look forward to another successful year in protecting consumers and making sure that we have healthy insurance markets.”

McKennon Law Group PC is proud to announce that its founding partner Robert J. McKennon has been recognized as one of Southern California’s “Super Lawyers” and he will appear in the upcoming 2012 edition ofSouthern California Super Lawyersmagazine, as well as the upcoming edition of Orange Coast Magazine.

Each year,Super Lawyersmagazine, which is published in all 50 states and reaches more than 13 million readers, names attorneys in each state who attain a high degree of peer recognition and professional achievement. The Super Lawyer designation is given to less than 5% of lawyers nationally after being nominated and voted on by their peers.

Court Approval is Not Needed to Assert a Punitive Damages Claim Against a Health Care Service Plan

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