CALL US NOW
EMAIL US NOW
Unlike a state law claim for benefits under an individual insurance policy, an ERISA claim generally limits recovery to benefits due under the plan: prejudgment interest, declaratory or equitable (non-monetary) relief and attorneys’ fees. Accordingly, looming attorneys’ fees serve as an important financial disincentive for an ERISA plan administrator’s misconduct. In today’s edition of the Los Angeles Daily Journal, Robert J. McKennon and Stephanie L. Talavera of the McKennon Law Group PC discuss the importance of ERISA attorneys’ fees and how a recent case positively impacts the ability to recover those fees. In a column entitled “Ruling Clears Up Attorney Fees in ERISA Cases,” we evaluate the effect of the new Ninth Circuit Court of Appeals case, Micha v. Sun Life Assurance of Canada, Inc., 2017 DJDAR 10411 (Nov.1, 2017) and explain how the decision provides ERISA plan participants, beneficiaries and fiduciaries with a solid foundation for recovery of certain attorneys’ fees in the future.
The Hartford Agrees to Purchase Aetna’s Group Disability Insurance and Group Life Insurance Business
In a deal between two of the country’s largest disability insurers, The Hartford agreed to purchase Aetna Life Insurance Company’s group life insurance and disability insurance business for $1.45 billion. After the purchase, which is expected to close before the end of 2017, The Hartford will be the second largest group life and disability insurer, with 20 million customers insured by the combined business. A vast majority of these customers’ claims will be governed by ERISA.
According to media reports, The Hartford’s purchase of Aetna’s group life and disability insurance was designed to strengthen the company’s business among mid-sized companies, and take advantage of Aetna’s superior technology infrastructure. Aetna, in turn, will focus on its race with rival health insurance companies like UnitedHealth Group, Cigna and Anthem.
The McKennon Law Group has successfully represented many clients with claims against both The Hartford and Aetna. If your group disability insurance claim or group life insurance claim was denied, please contact the McKennon Law Group at (949) 387-9595 for a free consultation.
Attorney Robert J. McKennon Educates Policyholders on ERISA and Disability Insurance Claims
When a disability insurance claim is denied, the process of challenging that wrongful denial can be daunting. At McKennon Law Group PC, we represent policyholders in their insurance disputes and help guide our clients through the complex insurance claims process. We pride ourselves on the relationships we build with our clients and work hard to ensure that our clients understand the status of their matter every step of the way.
As part of our firm’s dedication to serving insureds, Robert J. McKennon, the firm’s founder, answered some of the most frequently asked questions regarding disability insurance benefits and the Employee Retirement Income Security Act, or ERISA. In the Q&A, Mr. McKennon briefly explains the role of ERISA, the body of law that governs most employer-sponsored group benefit plans. He also briefly discusses insurance bad faith, which governs most individual disability insurance policies. Additionally, Mr. McKennon covers some common misconceptions regarding the disability insurance claims handling process, as well as the remedies available to an insured should they successfully overturn their wrongful denial.
At McKennon Law Group PC, we believe in establishing lasting relationships with our clients and providing the highest quality of legal services, with integrity. Part of that requires effective communication and taking the time to respond to your questions. If your claim for life, retirement, health, short-term disability or long-term disability benefits has been denied, you can call (949) 387-9595 for a free consultation with the attorneys of the McKennon Law Group PC, several of whom previously represented insurance companies and are exceptionally experienced in handling both ERISA insurance claims and non-ERISA state law insurance bad faith claims.
This was issued as a press release and appeared in numerous legal and non-legal publications. To see if Mr. McKennon answered your questions, please review the press release in full, below.
Attorney Robert J. McKennon Educates Policyholders on ERISA and Disability Insurance Claims
Southern California insurance litigation attorney Robert J. McKennon, of McKennon Law Group PC, examines four common insurance law issues.
NEWPORT BEACH, Calif. (PRWEB) October 25, 2017
Robert J. McKennon, founder of McKennon Law Group PC, which represents policyholders in their insurance disputes with insurers, asks and answers the top four most frequently asked questions concerning insurance law.
No. 1: What is ERISA? The Employee Retirement Income Security Act of 1974, ERISA, governs most employer-sponsored group benefit plans, including plans that provide health insurance, disability insurance and life insurance to employees.
“ERISA protects employees and requires that plan and claim administrators adhere to strict standards and deadlines when resolving disputes,” said McKennon. “As such, litigation under ERISA is very different from other forms of litigation, even other insurance litigation.”
No. 2: How do I get my disability benefits claim paid? Most people think that simply providing the insurance company with their medical records will be enough to support a claim for disability benefits. “In a perfect world that would be the case, but insurance companies are not typically interested in making it easy for people to collect their benefits,” noted McKennon. “If your claim is denied, the best thing you can do is hire an attorney who has experience dealing with insurance companies, which will greatly increase your odds of getting your claim paid.”
No. 3: What are my remedies if I sue the insurance company over my disability, life or health insurance claim and win? The remedies available to someone insured under an individual disability insurance policy are very broad and under a breach of contract claim include past due benefits and all future benefits. Under a bad faith claim, damages include emotional distress damages, economic damages and other compensatory and consequential damages, punitive damages, attorneys’ fees and interest.
“If the policy is issued through an employer to provide coverage to eligible employees, the remedies are very different. These are referred to as ‘group’ policies,” added McKennon. “Most people who have life, health and disability insurance are covered under group policies. Because most group policies are governed by ERISA, the remedies available to insureds are much more limited. If an individual insured under an ERISA group policy prevails at trial, he or she is only entitled to past due benefits, interest and attorneys’ fees.”
No. 4: What is insurance bad faith? “If you purchased an individual life, health or disability insurance policy, ERISA will not apply to your claim,” stated McKennon. “Instead, separate principles of tort law govern your claim, which includes what is referred to as ‘insurance bad faith.’ Litigation of an insurance bad faith claim involves proving that the insurer denied a claim or other policy benefit unreasonably or without proper cause. If a claimant can prove that the insurer acted with fraud, oppression or malice, punitive damages may be awarded.”
About Robert J. McKennon, McKennon Law Group PC
Robert J. McKennon represents individuals and corporations in insurance litigation matters in state and federal court. He has an AV Preeminent rating from Martindale-Hubbell and a “Superb” Avvo rating. He has been awarded the Super Lawyer designation every year since 2011. Practice areas of McKennon Law Group PC include bad faith insurance, disability insurance, life insurance, ERISA/employee benefits, health insurance, long-term care, property and casualty insurance, directors and officers liability insurance, professional liability insurance, insurance agent and broker liability, business litigation and unfair competition and unfair business practices. For more information, please call (949) 387-9595, or visit https://mslawllp.com.
About the NALA™
The NALA offers small and medium-sized businesses effective ways to reach customers through new media. As a single-agency source, the NALA helps businesses flourish in their local community. The NALA’s mission is to promote a business’ relevant and newsworthy events and achievements, both online and through traditional media. The information and content in this article are not in conjunction with the views of the NALA. For media inquiries, please call 805.650.6121, ext. 361.
California Court Affirms Decision Finding Bad Faith Where Insurer Interprets Policy Against Insured’s Interests
On August 31, 2017, the California Court of Appeal discussed a variety of topics touching upon important matters in insurance “bad faith” litigation in Pulte Home Corp. v. Am. Safety Indemnity Co., 14 Cal.App.5th 1086 (Aug. 31, 2017). In this blog, we discuss the case in detail as well as the potential benefits the opinion provides to insureds’ future claims for bad faith. Before we discuss the details of the case, we first address the basics of insurance bad faith. Next, we detail the issues addressed in the case, the facts of the case, the court’s reasoning and ultimate rationale. Finally, we address the Pulte’s broader impact, solidifying the insurer’s good faith duty to interpret ambiguous policy provisions in favor of the insured.
What is Insurance Bad Faith?
Before we discuss Pulte, we first need to briefly cover the basics of a claim for relief called “insurance bad faith.” Insurance bad faith relies on the underlying insurance contract, but more than a breach of contract claim, a bad faith claim asserts that the insurer breached the contract’s implied promise of good faith and fair dealing. Unlike the express provisions of the insurance policy contract, the implied promise requires that the insurer refrain from conduct that unreasonably or without proper cause harms the insured’s right to benefits under the insurance contract, it is said to have acted in “bad faith.”
The courts have established several well-defined duties that, if the insurer fails to perform them, can result in a breach of the implied covenant of good faith and fair dealing. For example, an insured may show bad faith by establishing that the insurer failed to meet its duty to conduct a thorough and fair investigation into all possible bases for coverage. Determining whether the insured has acted in bad faith is important because it directly affects the insured’s potential recovery. When an insurer acts in bad faith, the insured may have access to a substantial additional recovery, including emotional distress, consequential and punitive damages and attorney’s fees.
Pulte Home Corp. v. Am. Safety Indemnity Co.
The events leading to Pulte began in 2011 and 2013, when residents sued Pulte Home Corp. (“Pulte Home”) for defective construction. American Safety Indemnity Co. (“American Safety”) issued several sequential comprehensive general liability (“CGL”) insurance policies to three of Pulte’s subcontractors, and during 2003 to 2006, it added endorsements to those policies that named Pulte as an additional insured. American Safety failed to defend Pulte Home against the residents’ construction claims. American Safety did not defend Pulte Home because it asserted that the CGL policies did not cover the construction defects at issue. As a result, Pulte Home sued American Safety alleging that the policies did provide coverage and that it should have defended the claims for construction defect. The trial court found in favor of Pulte Home, asserting that the policies covered the construction defect claims as a matter of law. Accordingly, the trial court proceeded on claims of breach of contract and bad faith, with the bad faith claim based in part by denying the duty to defend. Ultimately, the trial court awarded contract damages for failure to defend, punitive damages and attorney’s fees.
American Safety appealed the trial court’s verdict, mounting several challenges to the judgment. Ultimately, the California Court of Appeal upheld the trial court’s substantive decision and rejected American Safety’s arguments. In doing so, the appellate court found that the trial court correctly interpreted ambiguous coverage provisions in favor of the insured when it found bad faith. As a corollary to that finding, the court also affirmed that American Safety improperly interpreted the insurance contract in its own favor, and that it did so unreasonably and in bad faith. While the appellate court did find that the trial court abused its discretion as to certain attorney’s fees that were originally based in contingency but awarded as hourly, it only directed the trial court to recalculate the fees and adjust the punitive damages award accordingly on a one-to-one ratio of compensatory damages to punitive damages.
Pulte strengthens California’s bad faith case law requiring an ambiguous insurance contract to be interpreted in favor of the insured and solidifies the principle that an insurer must interpret ambiguities favorably to the insured, or else it may be held liable for insurance bad faith.
Robert McKennon and Stephanie Talavera Publish Article in the Los Angeles Daily Journal: “An Agent of the Insurer.”
In the October 9, 2017 Los Angeles Daily Journal, Robert J. McKennon and Stephanie L. Talavera of the McKennon Law Group PC published a column entitled “An Agent of the Insurer,” covering a very important new Ninth Circuit Court of Appeals case, Salyers v. Metro. Life Ins. Co., 2017 DJDAR 9291 (Sept. 20, 2017). The article details the case’s key holdings, as it establishes federal ERISA common law rules that follow California’s employer-friendly rules. The decision provides a solid foundation for future ERISA plan participants and beneficiaries to vigorously attack ERISA coverage denials on theories of estoppel, waiver and breach of fiduciary duty.
Does an Insurance Company Need to Deny a Claim to be Liable for Bad Faith Damages? You May Be Surprised to Learn the Answer is “No.”
Every insurance contract is accompanied by an implied covenant of good faith and fair dealing, meaning that the insurer cannot “unfairly frustrate” or unreasonably “deprive” the insured of the benefits of the insurance contract. This implied covenant applies to all types of insurance policies, including disability insurance, life insurance, health/medical insurance, long-term care insurance, accidental death and dismemberment insurance, and homeowners insurance. If the insurer unreasonably or without proper cause refuses to pay a benefit due under in insurance policy, the insurer may have acted in “bad faith.” This may allow an insured to collect extra-contractual damages, such as emotional distress damages, attorney’s fees and punitive damages. Typically, bad faith allegations follow a decision by the insurance company to deny a valid claim for benefits.
However, a recent Central District of California decision confirmed that a bad faith claim can be asserted even in the absence of a claim denial, if the insured can assert that any benefit of the policy was withheld by the insurance company. A bad faith claim does not necessarily only follow the denial of a claim. An insurer’s decision to unreasonably withhold anything of value regarding the insurance policy can be an act of bad faith.
That case, EFG Bank AG, Cayman Branch v. Transamerica Life Insurance Co., 2017 WL 3017596, 2017 U.S. Dist. LEXIS 109780 (C.D. Cal., July 6, 2017), involved a dispute between Transamerica and the owners and beneficiaries of 68 universal life insurance policies. Under the policies, premiums were deposited into an account for each policy, and each month, Transamerica withdrew a monthly deduction from each account and deposited a separate amount of interest. The amount in each policy’s account is known as the “Accumulation Value.” The plaintiffs alleged that Transamerica breached those insurance contracts, and did so in bad faith, by wrongfully increasing the monthly deduction rates (“MDR”) on the policies, and in doing so reduced the Accumulation Value of the policies.
Transamerica filed a motion to dismiss, claiming that its actions in calculating the MDR were proper and consistent with the plain language of the policies. The Court denied the motions to dismiss, in full, and in the process, confirmed that insurers can be liable for bad faith, even in the absence of a claim denial decision.
First, the court denied Transamerica’s motion to dismiss the breach of contract claim, finding that the policies did not give Transamerica “unfettered discretion” to set the MDR lower than the guaranteed maximum rate included in the policies.
Turning to the bad faith claim, the Court first ruled that it was not duplicative of the breach of contract claim because the plaintiffs alleged that Transamerica “exercised its discretion [in setting the MDR] in a way that was intentionally designed to unfairly frustrate the agreed purposes of the Policies.”
Next, the Court analyzed Transamerica’s argument that plaintiffs could not maintain a bad faith claim because they did not allege that Transamerica “withheld a benefit,” an allegation necessary to maintain a bad faith claim. See, e.g., Benavides v. State Farm General Insurance Co., 136 Cal. App. 4th 1241, 1250 (2006) (“[T]he essence of the tort of the implied covenant … is focused on the prompt payment of benefits under the insurance policy, there is no cause of action … when no benefits are due.”). The Court rejected Transamerica’s argument, explaining that if Transamerica improperly increased the MDR, that reduced plaintiffs’ Accumulation Value in the policies and forced them to pay increased premiums, and that impermissibly increasing premiums could constitute a breach of the implied covenant of good faith and fair dealing. See, e.g., Notrica v. State Comp. Ins. Fund, 70 Cal. App. 4th 911 (1999).
Typically, bad faith insurance claims are asserted only after an insurance company wrongfully denies a benefits claim. This case further confirms that an insurance company can be liable for bad faith damages for actions other than denying a claim. Basically, if the insurance company withholds anything of value under an insurance policy from an insured or causes the insured to unnecessarily pay increased premiums, they are potentially liable for bad faith damages.
