News Archives - Page 36 of 37 - McKennon Law Group

Will Healthcare Reform Affect the Rate of Claim Denials?

On Monday October 19, 2009, Lisa Girion of the Los Angeles Times reported on the healthcare reform bills being debated in Congress and their potential impact on claim denials by insurers. Girion states that, “Despite growing frustration with the way health insurers deny medical treatments, major healthcare bills pending in Congress would give patients little new power to challenge those sometimes life-and-death decisions.” She further explains that “a patient’s ability to fight insurers’ coverage decisions could be more important than ever because Congress, in promoting cost containment and price competition, may actually add to the pressure on insurers to deny requests for treatment.”

The article discusses the wrongful death lawsuit filed by Hilda and Grigor Sarkisyan, whose daughter Nataline died in 2007 after Cigna decided not to cover a liver transplant. The lawsuit against Cigna over the transplant denial was dismissed this year by a federal judge, who ruled that the Employee Retirement Income Security Act (“ERISA”) preempts suits with state law claims for damages over such health benefit decisions. The Sarkisyans traveled to Washington this year to try to persuade members of Congress to pass legislation which would remove ERISA’s bar of certain types of damages that are now available under state law.

Rep. Adam B. Schiff (D-Burbank), who met with the Sarkisyans in Washington, said that there are not enough votes in Congress to pass such legislation. Insurers and employers strongly support ERISA’s limitations on damages. They say any increase in litigation would drive up costs and could force some employers to drop health benefits.

The healthcare reform bill pending in the House would extend the right to sue under state law for damages to anyone who buys coverage through one of the health insurance exchanges it envisions. That could include small businesses. However, the pending legislation does not remove ERISA’s barrier to such suits by employees who procure coverage in the employment-based insurance market.

House Committee Votes to Strip Health Insurance Industry of Exemption from Federal Antitrust Laws

As reported by the Associated Press, a House committee has voted to strip the health insurance industry of its exemption from federal antitrust laws as senators announced plans to take the same step. The House Judiciary Committee voted 20 to 9 to repeal a law that exempted the health insurance industry from federal controls over certain antitrust violations, including price-fixing. It is our belief that this repeal will not likely survive any national healthcare bill.

No More Gender Rating in California

The practice of paying different rates based on gender for the same insurance is called gender rating. Effective January 1, 2010, health insurance companies and HMO’s writing insurance in California will not be able to charge men and women different rates for the same type of insurance policy. It has been reported that currently, California women pay anywhere from 5% to 30% more than male counterparts for equivalent insurance, even on policies without maternity coverage.

The issue was helped along by San Francisco City Attorney Dennis Herrera who sued state officials for gender rating, claiming that the practice violates provisions of the California Constitution. The suit was stayed while details of the bill were negotiated and, in light of the new California health insurance law, will likely be dismissed.

The U.S Supreme Court’s Iqbal Opinion to Get Congressional Airing

Ashcroft v. Iqbal, 556 U.S. ___, 129 S. Ct. 1937 (2009), the 5-month-old U.S. Supreme Court decision that has made federal pleadings standards much more stringent, will get a Capitol Hill airing on Tuesday October 27, 2009. The House Judiciary Committee is scheduled to hold the first congressional hearing on the far-reaching May ruling, which raised the pleading standard for most civil complaints, making it more difficult to keep cases from being dismissed.

Iqbal was a 5 to 4 decision delivered on May 18, 2009 by Justice Kennedy held that Iqbal’s complaint failed to plead sufficient facts to state a claim for purposeful and unlawful discrimination.

Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” “[D]etailed factual allegations” are not required (Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)), but the Rule does call for sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face,” Id. at 570. A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. at 556.

The Court held that Iqbal’s pleadings did not comply with Rule 8 under Twombly. The Court found that several of his allegations – that petitioners agreed to subject him to harsh conditions as a matter of policy, solely on account of discriminatory factors and for no legitimate penological interest, that Ashcroft was that policy’s “principal architect”, and that Mueller was “instrumental” in its adoption and execution, were conclusory and not entitled to be assumed true. The Court decided that given that the September 11 attacks were perpetrated by Arab Muslims, it was not surprising that a legitimate policy directing law enforcement to arrest and detain individuals because of their suspected link to the attacks would produce a disparate, incidental impact on Arab Muslims, even though the policy’s purpose was to target neither Arabs nor Muslims. Even if the complaint’s well-pleaded facts gave rise to a plausible inference that Iqbal’s arrest was the result of unconstitutional discrimination, that inference alone did not entitle him to relief since his claims rested solely on their ostensible policy of holding detainees categorized as “of high interest,” but the complaint does not contain facts plausibly showing that their policy was based on discriminatory factors.

The Court rejected Iqbal’s arguments. First, the Court found that Iqbal’s claim that Twombly should be limited to its antitrust context was not supported by that case or the Federal Rules. Second, the Court found that Rule 9(b), which requires particularity when pleading “fraud or mistake” but allows “other conditions of a person’s mind [to] be alleged generally,” did not require courts to credit a complaint’s conclusory statements without reference to its factual context.

Law professor Herman Schwarzt discusses the aftermath of Iqbal in his article published Sept. 30th in The Nation

In the few months since the decision in Iqbal came down, it has resulted in the dismissal of 1500 District Court and 100 appellate court cases, many if not most of which would probably have survived; more dismissal motions are pending. Complaints against drug and other companies for multi-organ failure after taking an epilepsy drug, for false marketing and for excessive lead in baby bottle coolers have all been thrown out at the pleading stage, as have many civil rights cases. Iqbal has also been used to dismiss a First Amendment suit by anti-Bush protesters against the Secret Service, and complaints against Coca-Cola and its Colombian subsidiaries for the murder and torture of trade unionists. In all these cases, the mental element–what defendants knew and when they knew it–is usually crucial, and without going into a defendant’s files and oral questioning of knowledgeable people, that cannot be determined.

With the future of thousands of potential lawsuits at stake, many of these insurance class actions, expect a battle royale between lobbyists for the trial lawyers and the business community.

Duty to Defend Triggered by the Peculiar Risk Doctrine

In Amer. States Ins. v. Progressive Casualty Ins., 180 Cal. App. 4th 18 (2009), the California Court of Appeal addressed the “peculiar risk” doctrine in the context of an insurer’s duty to defend.

Victor Meza was a self-employed truck driver who was hired by Western Trucking LLC (“Western”) as an independent contractor. While driving a tractor trailer owned by Western and insured by Wilshire Insurance Company (“Wilshire”), Meza collided with a pedestrian, Yevdokia Bristman, seriously injuring him. Bristman later sued the grading contractor who hired Western, Vinci Pacific Corporation and the general contractor, Garden Communities (collectively “Vinci Pacific”).

Meza’s liability insurance carrier was Progressive Casualty Insurance Company (“Progressive”) and American States Insurance Co (“American”) provided the commercial auto liability policy covering Western and Vinci Pacific. American tendered its defense of the Bristman suit to Progressive who disclaimed coverage. American then sued Progressive, seeking a declaration that Progressive had a duty to defend. The trial court held that the “peculiar risk” doctrine did not apply and that Progressive did not have a duty to defend.

American appealed and the appellate court reversed the trial court’s decision, holding that the Progressive had a duty to defend American against Bristman’s lawsuit based on the “peculiar risk” doctrine. The “peculiar risk” doctrine is a form of vicariously liability where an owner or contractor can be held directly liable for damages that an independent contractor causes by negligently performing his work. Progressive argued that this was a simple automobile accident that did not implicate any special or inherent danger in connection with the subcontractor’s operation of the truck. The Court of Appeal disagreed. Instead, the court noted that the Vinci Pacific allowed its subcontractors to use an entrance that required drivers to execute a U-turn, jump a curb, cross two pedestrian crosswalks and drive on the sidewalk, all without the assistance of flagmen. This, the court reasoned, represented a level of control by the general contractor over the contractor’s work that involved a special, recognizable and inherent danger. As a result, Vinci Pacific was potentially liable for Bristman’s injuries under the vicarious liability theory of the “peculiar risk” doctrine.

Having established that potential liability existed, the court then held that Progressive had a duty to defend stating, “It is enough that a single claim is potentially covered by the policy; the insurer owes a duty to defend even if all other claims against the insured are clearly not covered […] [T]he insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot; the insurer, in other words, must present undisputed facts that eliminate any possibility of coverage.”

In holding that Progressive owed a duty to defend Vinci pursuant to the “peculiar risk” doctrine, the court noted two caveats. First, that “where more than one insurer owes a duty to defend, a defense by one constitutes no excuse of the failure of any other insurer to perform.” Second, that Progressive “may have a right to be reimbursed for defense costs allocable solely to claims for which there was no potential vicarious coverage under their policies.”

Having concluded that a duty to defend existed based on potential liability under the peculiar risk doctrine, the Court of Appeal reversed and remanded the case for further proceedings.

Get the Answers and Assistance You Need