Articles Posted in Insurance Law

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Reid founded Capitol, which owned commmunity banks, and served as its chairman and CEO. His daughter and her husband served as president and general counsel. Capitol accepted Federal Reserve oversight in 2009. In 2012, Capitol sought Chapter 11 bankruptcy reorganization and became a “debtor in possession.” In 2013, Capitol decided to liquidate and submitted proposals that released its executives from liability. The creditors’ committee objected and unsuccessfully sought derivative standing to sue the Reids for breach of their fiduciary duties. The Reids and the creditors continued negotiation. In 2014, they agreed to a liquidation plan that required Capitol to assign its legal claims to a Liquidating Trust; the Reids would have no liability for any conduct after the bankruptcy filing and their pre-petition liability was limited to insurance recovery. Capitol had a management liability insurance policy, purchased about a year before it filed the bankruptcy petition. The liquidation plan required the Reids to sue the insurer if it denied coverage. The policy excluded from coverage “any claim made against an Insured . . . by, on behalf of, or in the name or right of, the Company or any Insured,” except for derivative suits by independent shareholders and employment claims (insured-versus-insured exclusion). The Liquidation Trustee sued the Reids for $18.8 million and notified the insurer. The Sixth Circuit affirmed a declaratory judgment that the insurer had no obligation with respect to the lawsuit, which fell within the insured-versus-insured exclusion. View "Indian Harbor Insurance Co. v. Zucker" on Justia Law

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Raymond, injured in a slip-and-fall accident, received medical treatment at Mercy Health Anderson Hospital. Strunk, injured in a car accident, received medical treatment at Mercy Health Clermont Hospital. Both have health insurance. Each of their insurers has an agreement with Mercy for the provision of services. Raymond and Strunk provided all information necessary for the hospital to submit claims. Mercy did not submit claims to the insurers. Instead, Avectus, on behalf of Mercy, sent letters to Raymond’s and Strunk’s attorneys stating the balance due for medical services and requesting that, to prevent collection efforts against their respective clients, the attorneys sign a “letter of protection” against any settlement or judgment, agreeing “to withhold and pay directly to Mercy Health the balance of any unpaid charges ... should my firm obtain any settlement or judgment for this patient." Raymond and Strunk claimed that Mercy and Avectus sought compensation from them for their medical expenses, in violation of Ohio Revised Code 1751.60. The district court dismissed. The Sixth Circuit reversed. The defendants sought payment “from a health-insuring corporation’s insured” while in a healthcare services contract with their health-insurance providers. The court rejected a claim that the defendants effectively sought compensation from a third party. View "Raymond v. Avectus Healthcare Solutions, LLC" on Justia Law

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Corey worked as a machine operator in Eaton’s Ohio factory. Corey has long suffered from cluster headaches— extremely painful attacks that strike several times per day for weeks on end. In 2014, Corey applied for short-term disability benefits under Eaton’s disability plan after a bout of headaches forced him to miss work. After granting a period of disability, the third party administering Eaton’s disability plan discontinued benefits because Corey failed to provide objective findings of disability. Under the plan, “[o]bjective findings include . . . [m]edications and/or treatment plan.” Corey’s physicians treated his headaches by prescribing prednisone, injecting Imitrex (a headache medication), administering oxygen therapy, and performing an occipital nerve block. The district court upheld the denial. The Sixth Circuit reversed, citing the Employee Retirement Income Security Act, 29 U.S.C. 1132(a)(1)(B). Corey’s medication and treatment plan satisfy the plan’s objective findings requirement. View "Corey v. Sedgwick Claims Management Services, Inc." on Justia Law

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As a nurse at the University of Louisville Hospital, Milby was covered by a long-term disability insurance policy. In 2011, Milby sought and received disability benefits for 17 months. During a subsequent eligibility review, the plan engaged MCMC, a third-party reviewer. MCMC opined that the “opinions of [Milby’s treating physicians] are not supported by the available medical documentation” and that she could perform sustained full-time work without restrictions as of 2/22/2013. Neither MCMC nor its agent was licensed to practice medicine in Kentucky. The plan terminated Milby’s benefits effective February 2013. Milby’s suit against her disability insurance provider remains pending. She also filed suit alleging negligence per se against MCMC for practicing medicine in Kentucky without appropriate licenses. MCMC removed the case to federal court, claiming complete preemption under the Employee Retirement Income Security Act (ERISA). The trial court denied Milby’s motion for remand to state court and dismissed. The Sixth Circuit affirmed. The state-law claim fits in the category of claims that are completely preempted by ERISA: it is in essence about the denial of benefits under an ERISA plan and the defendant does not owe an independent duty to the plaintiff because the defendants were not practicing medicine under the specified Kentucky law. View "Milby v. MCMC, LLC" on Justia Law

Posted in: ERISA, Insurance Law

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Fleet Owners Fund is a multi-employer “welfare benefit plan” under the Employee Retirement Security Act (ERISA), 29 U.S.C. 1001, and a “group health plan” under the Patient Protection and Affordable Care Act (ACA), 26 U.S.C. 5000A. Superior Dairy contracted with Fleet for employee medical insurance; the Participation Agreement incorporated by reference a 2002 Agreement. In a purported class action, Superior and its employee alleged that, before entering into the Agreement, it received assurances from Fleet Owners and plan trustees, that the plan would comply in all respects with federal law, including ERISA and the ACA. Plaintiffs claim that, notwithstanding the ACA’s statutory requirement that all group health plans eliminate per-participant and per-beneficiary pecuniary caps for both annual and lifetime benefits, the plan maintains such restrictions and that Superior purchased supplemental health insurance benefits to fully cover its employees. Fleet argued that the plan is exempt from such requirements as a “grandfathered” plan. The district court dismissed the seven-count complaint. The Sixth Circuit affirmed, concluding that plaintiffs lacked standing to bring claims under ERISA and ACA, having failed to allege concrete injury, and did not allege specific false statements. View "Soehnlen v. Fleet Owners Insurance Fund" on Justia Law

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In the 1990s, Stryker purchased a Pfizer subsidiary that made orthopedic products, including the “Uni-knee” artificial joint. It was later discovered that those devices were sterilized using gamma rays, which caused polyethylene to degrade. If implanted past their five-year shelf-life, the knees could fail. Expired Uni-Knees were implanted in patients. Stryker, facing individual product-liability claims and potentially liable to Pfizer, sought defense and indemnification under a $15 million XL “commercial umbrella” policy, and a TIG “excess liability” policy that kicked in after the umbrella policy was fully “exhausted.” XL denied coverage, arguing that the Uni-Knee claims were “known or suspected” before the inception of the policy. Stryker filed lawsuits against the insurers, then unilaterally settled its individual product-liability claims for $7.6 million. Stryker was adjudicated liable to Pfizer for $17.7 million. About 10 years later, the Sixth Circuit held that XL was obliged to provide coverage. XL paid out the Pfizer judgment first, exhausting coverage limits. TIG declined to pay the remaining $7.6 million, arguing that Stryker failed to obtain “written consent” at the time the settlements were made. Stryker claimed that the policy was latently ambiguous because XL satisfied the Pfizer judgment first, Stryker was forced to present its settlements to TIG years after they were made. The district court granted Stryker summary judgment. The Sixth Circuit reversed, finding the contract unambiguous in requiring consent. View "Stryker Corp. v. National Union Fire Insurance Co." on Justia Law

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The State of Michigan contracted with E.L. Bailey to construct a prison kitchen. After delays, the parties sued each other for breach of contract. Bailey had obtained surety bonds from Great American Insurance Company (GAIC) and had agreed to assign GAIC the right to settle claims related to the project if Bailey allegedly breached the contract. Exercising that right, GAIC negotiated with the state without Bailey’s knowledge, then obtained a declaratory judgment recognizing its right to settle. The Sixth Circuit affirmed, rejecting, for insufficient evidence, a claim that GAIC settled Bailey’s claims against the state in bad faith. Although “there can be bad faith without actual dishonesty or fraud,” when “the insurer is motivated by selfish purpose or by a desire to protect its own interests at the expense of its insured’s interest,” “offers of compromise” or “honest errors of judgment are not sufficient to establish bad faith.” There was no evidence that GAIC’s settlement of Bailey’s claims was undertaken with selfish purpose at Bailey’s expense. GAIC and Bailey shared an interest in securing the highest settlement possible from the state. Even if GAIC misunderstood Michigan law, leading it to miscalculate its liability and accept a lower settlement, “honest errors of judgment are not sufficient to establish bad faith.” View "Great American Insurance Co. v. E.L. Bailey & Co." on Justia Law

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Okuno was working as an art director with a clothing company when she developed symptoms including vertigo, extreme headaches, memory loss, and abdominal pain. Though she had previously been diagnosed with fibromyalgia and degenerative disc disease, Okuno contends that these maladies had been “stable and well-controlled” for years and did not prevent her from working. After visits to multiple specialists, numerous tests, and two visits to the emergency room, Okuno was eventually diagnosed with narcolepsy, Crohn’s disease, and Sjogren’s syndrome, an autoimmune disease. After diagnosis, she struggled with negative drug interactions and the side effects associated with her many treatments. Unable to continue working, Okuno went on short-term disability and applied for benefits under her employer’s long-term disability plan, issued and administrated by Reliance. Reliance denied the application on the basis that depression and anxiety contributed to Okuno’s disabling conditions. After exhausting her administrative appeals, Okuno brought a claim under the Employee Retirement Income Security Act (ERISA). 29 U.S.C. 1132(a)(1)(B). The district court found in favor of Reliance on cross-motions for judgment on the administrative record. The Sixth Circuit reversed, reasoning that her physical ailments, including Crohn’s disease, narcolepsy, and Sjogren’s syndrome, are disabling when considered apart from any mental component. View "Okuno v. Reliance Standard Life Ins. Co." on Justia Law

Posted in: ERISA, Insurance Law

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Black drove a truck for Western, one of 48 freight service providers that carry raw paper to Dixie’s Bowling Green factory. Black parked the truck, containing 41,214 pounds of pulpboard rolls, separated by 10-lb. rubber mats. Black received permission from Chinn, the Dixie forklift operator, to enter the loading dock. It was “[c]ommon practice” for the truck driver to unload the rubber mats so that the Dixie forklift operator did not “have to get off each time.” Chinn and Black got “into a rhythm” in unloading the materials until Chinn ran over Black’s foot with the forklift, leading to a below-the-knee amputation of Black’s leg. Black received workers’ compensation from Western, then filed a tort action against Dixie, seeking $1,850,000. Following a remand, the district court denied Dixie summary judgment. The Sixth Circuit reversed, holding that the Kentucky Workers’ Compensation Act barred Black’s claims, Ky. Rev. Stat. 342.610(2), .690. The work Black was doing as part and parcel of what Dixie does; a worker injured in this setting will receive compensation regardless of fault by a company in Dixie’s shoes or one in Western’s shoes. The immunity from a further lawsuit applies as well. This burden and benefit are the trade-offs built into any workers’ compensation system. View "Black v. Dixie Consumer Prods., LLC" on Justia Law

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In 2006, plaintiffs procured a mortgage from Regions to purchase a home near the Cumberland River. The National Flood Insurance Act (NFIA) requires mortgagors to obtain flood insurance for properties in flood zones, 42 U.S.C. 4012a(b)(1). CoreLogic provided Regions with flood-zone certification. The National Flood Insurance Program Flood Insurance Rate Map (FIRM) showed that the property was in a Special Flood Hazard Area (SFHA), but CoreLogic informed plaintiffs that their property was in a non-SFHA zone. FEMA issued a revised FIRM for the area months later. Regions informed plaintiffs that their home was in a flood zone and that they must procure flood insurance within 45 days. Plaintiffs hired Vandenbergh, who procured for them a Nationwide Standard Flood Insurance Policy for a home constructed before the effective FIRM. Plaintiffs’ home, built in 1984, after the 1981 FIRM, required a post-FIRM policy, under which they could receive full coverage only after obtaining an elevation certificate showing sufficient elevation above the base flood zone. A 2010 flood submerged plaintiffs’ home in 16” of water. Nationwide informed plaintiffs of pre-/post-FIRM discrepancy and required an elevation certificate, which showed that the home’s lower level was below the base flood-zone elevation. Because plaintiffs’ home was post-FIRM and situated below the base flood-zone elevation, their SFIP did not cover all losses “below the lowest elevated floor.” FEMA upheld Nationwide’s coverage determination. The Sixth Circuit affirmed partial summary judgment for Vandenbergh, but vacated dismissal of claims against Regions, CoreLogic, and Nationwide. The NFIA did not preempt state-law claims arising from procurement of the SFIP: that plaintiffs would not have purchased their home absent defendants’ negligence and breach of fiduciary duty. View "Harris v. Nationwide Mut. Fire Ins." on Justia Law