Articles Posted in Insurance Law

Good news for those interested in the fight to keep the insurance industry fair and honest in California. Commissioner Dave Jones announced on Tuesday that California’s Department of Insurance (CDI) recovered $54 million for consumers in 2011.

The Department has two branches, one to deal with consumer complaints and the other to investigate insurance companies through a thorough examination process (see further discussion of CDI here. The Consumer Services branch runs a consumer hotline that receives about 200,000 calls annually, as well as bureaus on health claims, claims services, and rating and underwriting services. Our San Francisco insurance lawyer was happy to read that the Consumer Services branch recovered over $49 million last year through investigations of the complaints filed. The other division, the Market Conduct Branch, which includes a field claims bureau and a field rating and underwriting bureau, ran 114 examinations of insurance companies last year and recovered an additional $5 million for California insurance consumers. Commissioner Jones stated that protecting consumers is the Department’s top priority and that, “Our consumer complaint services and market conduct exams are important tools that we employ to respond to the needs of consumers and proactively go after any activities that pose a threat to policyholders.”

The 2011 numbers are actually down from 2010, when the Department of Insurance recovered $63.8 million for consumers. And the Department recovered $89.1 million in 2009, but that number was higher because the Department was still processing the high volume of claims after California’s devastating 2007-08 wildfires. These high recovery numbers year after year show that the Department of Insurance is needed to be a watchdog for nefarious insurance companies trying to use inappropriate tactics against honest, paying consumers.

Among the new laws passed in 2011 is a new California insurance law, SB 946, which aims to complement existing law that requires equal coverage of mental health conditions and medical conditions. The Mental Health Parity Law and a settlement agreement reached by insurance companies and the California Department of Managed Health Care provide for insurance coverage of mental health conditions, including the full spectrum of autism. Insurance companies must provide equal mental health coverage and maximum lifetime benefits at the same rates as medical coverage.

Existing regulations required that all treatment be provided by licensed professionals, such as psychologists, registered nurses, and social workers. However, this language excluded certified providers of “applied behavior analysis” (ABA,) a prevalent strategy meant to improve behavior and quality of life for families with autistic children. The distinction between a licensed profession and a certified one is made by how the profession is regulated. Licensed professions are regulated by the state while certified professions are regulated by non-governmental entities.

The new law has a great impact on families with autistic children attempting to obtain health insurance and make claims to pay for behavioral treatments. It requires insurance companies to cover mental health treatment such as applied behavior analysis as long as it is prescribed by a licensed professional. The mental health treatment itself may be carried out by professionals who are not regulated specifically by the State of California.

The California Association of Health Plans opposed the bill, stating an industry study that the bill would effectively raise insurance costs by $850 million. A similar study carried out by the California Health Review found that it would raise insurance costs by about $93 million and lower the costs of special education and social services, paid for by the taxpayer, by about $140 million.

Families affected by the bill should take some exceptions to coverage into consideration. Insurance plans provided by federal and state governments, such as ERISA, CalPERS, Medicare, and Medi-Cal, are excluded from the law’s requirements. Those plans have their own requirements regarding mental healthcare. Also, plans that are considered “self-funded” or paid for by an employer who did not purchase a fully funded plan from a third party are excepted from the bill’s regulations. It is difficult for insured employees to tell the difference and should call their employer’s human resources department to inquire.

Moreover, the bill is effective July 1, 2012, but it sunsets on July 1, 2014 only two years later. The federal healthcare plan is set to take effect at that time and SB 946 will have to be re-evaluated to comply with federal law. Therefore, families should look closely for deadlines and news updates to determine future pay outs for mental healthcare. In the meantime, Autism Speaks, a prominent autism advocacy organization, recommends that persons harmed by insurance companies violating this or other insurance laws contact an attorney to see if legal action is appropriate.

Besides the laws already mentioned, insurance companies doing business in California must adhere to the California Insurance Code. Insurance companies may not engage in tactics meant to delay payment or offer to pay out low amounts on claims in bad faith. Additionally, they must communicate promptly with the insured regarding their claims. The insurance company must tell you why they denied your claim.
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An annual California Employer Health Benefits Survey came out this week with bleak news for California insurance consumers. It polled 770 benefit managers at private companies in the state from July to October 2011. The bottom line of the survey was that fewer companies offered health insurance in 2011 and those that did charged more for it. Those of us who practice insurance law in California are naturally concerned about these newly released statistics and what further impact the numbers could have as the health insurance market feels pressure from the economic downturn.

In California, 63 percent of workers have employer-sponsored health insurance, down from 73 percent two years ago. And premiums for these health plans rose by an astonishing 153.5 percent since 2002, more than five times California’s inflation rate for the same period. About 25 percent of employers either reduced benefits or raised costs on employees in 2011. A large part of this is due to the economic downturn of the last few years coupled with steadily rising costs. And there is no end to this trend in 2012 as 36 percent of California employers stated they are either somewhat or very likely to increase the amount employees pay this year. This upward trend in costs has been present for several decades, but the dramatic upturn in the numbers in this most recent survey are still striking even to experienced San Francisco insurance lawyers.

The numbers are especially alarming considering consumers are getting fewer benefits for their money, as well. The insurance benefits decreased at the same time as co-pays, deductibles, and premiums rose dramatically in cost for the employee-consumers. And employers are paying more than average in California, as well. They contribute, on average, $5,000 per single employee and nearly $12,000 a year for family coverage.

As San Francisco insurance attorneys we were glad to see the latest news that Blue Shield of California and Blue Shield of California Life and Health Insurance Company, a major insurer, finally settled a multi-year lawsuit. It is encouraging to see even a small correction of a gross injustice done to the hardworking insurance consumers of California.

After three years of investigation, the lawsuit was filed in 2008 by then City Attorney Rocky Delgadillo on behalf of the city of Los Angeles, alleging that the insurance provider wrongly dropped policy holders after they became ill, duping consumers into buying insurance that would be rescinded, and other shady business practices. The city of Los Angeles was seeking $1 billion in damages and restitution. Blue Shield was accused of rescinding hundreds of policies of patients after they were hospitalized or required major medical procedures. The consumers had previously applied and were approved for insurance, only to be told once they needed health care benefits that they had made a mistake on their misleading or confusing application form, discovered from a retroactive investigation by the insurance company. Often these consumers had been paying for health insurance for years, only to find out at the critical moment that they paid for nothing. Thousands of cases were investigated. Since 2002, Blue Shield denied benefits to 850 people and delayed benefits to countless more.

A federal ban on these types of rescissions for unintentional mistakes on insurance applications went into effect in September 2010 because of the new healthcare legislation. Now Blue Shield has settled for $2 million, to be split between the city and Los Angeles County, and the company will also pay the legal costs of the lawsuit, but without admitting any fault in the matter.

Our San Francisco insurance claim attorney know that there are many ways nature can cause problems in a state as big and diverse as ours. Last week this blog talked about a flood (see here). This week another act of nature caught our eye- wind and wind damage. In early December, hurricane force winds pummeled areas of Southern California and left hundreds of thousands without power. Estimates say the storms may have caused $40 million in damage. The Santa Ana winds toppled countless trees, especially in the hard-hit Pasadena area.

When Californians are faced with these weather emergencies, it is a good wake up call to the rest of us to ensure we are as prepared as we can be for natural disasters. People often have specific insurance coverage for earthquakes or for floods, but do you know how wind storm damage will be handled by your insurance companies?

Most homeowner’s insurance policies will include some coverage for wind damage, such as a tree falling on a house. “So long as that tree has damaged something on your house or property, your homeowner’s policy will typically have some amount available for tree removal,” said Candysse Miller, executive director of the Insurance Information Network of California to the Pasadena Star-News earlier this month. Other less visible kinds of damage can be more difficult to deal with. Insurance companies often try to claim things like damaged or loosened tiles or shingles on your roof due to high winds is actually caused by normal age/ wear and tear. Roof problems can lead to other expensive home issues, such as water leakage, if the roof is not properly repaired. Insurance companies may also try to claim that only some tiles or shingles need replacing, but before you agree to that make sure you know the true extent of the damage to your roof and do not accept a partial fix to a much bigger problem. You pay for your homeowner’s insurance and you deserve the full benefits you need.

Our California insurance attorneys know how difficult it can be to deal with insurance companies after an unexpected disaster. When something happens that severely disrupts your life, like a major illness, death, or natural disaster, the last thing you want to think about- worry about- is dealing with an insurance company employee asking you all kinds of questions. But what is worse is when you realize that all the money you paid over the years to the insurance company is no guarantee that the benefits you expect will be available when you need them.

Our San Francisco insurance attorneys noticed one striking recent example in a CBS News story this week. It involves a California town called Capitola, the site of devastating floods earlier this year. In March, a drainpipe in Capitola burst after an average rain storm. The very next day a larger storm hit the area and Capitola was not only already dealing with a problem, but there was no pipe to drain the water anymore. For the residents of Capitola, California, their problems were just beginning.

Some residents had flood insurance, and they thought surely the hard earned money they paid to their insurance company would allow them to rebuild. But those residents discovered that when they called about their flood insurance, their insurance company told them that the situation did not count as a flood. The company claimed it was a broken pipe and directed the policyholders to their liability insurance. But they were then told by the liability insurance handlers that it was a flood, so the liability insurance does not cover the damage. This ridiculous dilemma caused not only many people to worry about their homes, but also severely affected small local businesses trying to stay afloat in a recession economy.

Our San Francisco insurance attorneys know how to deal with insurance companies who are wrongfully trying to deny consumer’s the benefits they paid for. We know how frightening it is to hear that an insurance claim is denied when you were counting on that money for critical expenses. But 2012 holds promise for a more fair insurance litigation environment when a company improperly denies a life insurance or disability claim thanks to a new law- California Insurance Code Section 10110.6. It is important to note this new law relates only to life insurance and disability insurance, and not other types of insurance. It was sponsored by Senator Ron Calderon with the support of California Insurance Commissioner Dave Jones, unanimously passed the Legislature and was signed by Governor Jerry Brown in October. A similar bill was vetoed by Governor Schwarzenegger in 2010.

As of January 1, insurance companies in California will no longer be able to reserve discretionary authority to the themselves to determine or interpret a policy and decide if a policyholder is entitled to benefits. It applies to all life and disability insurance policies that are issued, delivered, or renewed to a California resident starting in January. This gives discretion in these matters to judges, which is as it should be. Judges know the law and are impartial observers. It is common sense that it is unfair to have a party to the dispute- one who stands to earn money depending on the outcome- be the final arbitrator of that dispute. Insurance Commissioner Jones likened it to a “fox guarding a henhouse.” But that is exactly how these scenarios worked until the passing of this new law. Insurance companies used these discretionary clauses as a shield from liability for valid claims and therefore nullified bargained for benefits. Suing the insurance companies over inappropriately denied benefits was often useless. If the policy included a discretionary clause, the judge’s hands were tied and he or she had to assume the insurance companies acted correctly unless the policyholder could prove that the company’s denial of benefits was arbitrary or capricious. Even if a judge believed the policyholder should have received the denied benefits, unless the company was arbitrary or capricious the judge could offer no remedy to the policyholder, who was left disabled or grieving for a loved one often in dire financial straits.

As San Francisco insurance denial attorneys, we are thankful the new law addresses this obvious inequity and helps level the playing field for consumers. It stops the practice of biased insurance companies ignoring or overriding a doctor’s opinion about whether a policyholder qualifies for disability benefits based on their own greedy concerns for their profit margins.

Our firm’s San Francisco insurance attorney knows that there are a lot of small business owners in our community, and that employee health insurance accounts for a significant amount of these local business’s costs. Often, health insurance is second only to payroll as a business’s greatest expense. Usually, small business owners have an insurance broker who sets up the company’s health insurance, and that broker earns a commission on the premiums on that account. This creates a disincentive for brokers to find ways to decrease expensive premiums for the business owners because that would decrease their commission.

The new federal healthcare legislation, the Affordable Care Act stipulates that insurance companies have to spend at least 85 percent of premiums on claims for employers with at least 50 employees, and for individuals and small business with less than 50 employees, at least 80 percent must be spent on benefits and improving quality for the customer, to avoid the medical loss ratio from things like broker commissions. The new law also requires that insurance companies publicly report how they spend premiums, so consumers can see how much of their money is spent on medical care and how much is used for administrative purposes.

A smart business owner will talk with their insurance broker and ask how the broker is working to decrease the business’s health insurance costs. The amount and type of insurance claims made by the employees determines the premiums, and therefore the cost to the company. By asking the insurance company for this data on medical claims, a business owner can see where costs need to be lowered and by knowing the problem, can more easily determine effective solutions.

Whether you are a small business owner or simply an individual in need of information about California insurance law issues, the Brod Firm hopes that this blog is informative and helpful. To start this new blog, our San Francisco insurance lawyers want to give an introduction to the basic topic of insurance fraud, a common type of occurrence that many community members think of when they consider insurance law.

A recent article in the San Francisco Chronicle called insurance fraud one of the oldest types of fraud recorded in history, citing an example of an ancient Greek ship sunk by its owner to collect insurance money. The article also reminded readers that insurance fraud continues to be pervasive and affects us all, whether as a policyholder or as a shareholder in an insurance company. There are two basic types of insurance fraud depending on the fraudulent party, either the buyer or the seller of the insurance. The buyer can try to manipulate the insurance process to his or her advantage to try to obtain something that he or she is not entitled to. The seller can also try to game the system unfairly to maximize profit. And insurance fraud affects everyone in the insurance system, including innocent parties, because insurance is built on a community of people pooling together to spread the risk. One instance of fraud can affect the costs and risks of everyone in the community.

In California, the Department of Insurance’s Investigation Division deals with customer complaints about unlawful activity by insurance companies. The Investigation Division can send cases documenting serious violations for either administrative or criminal prosecution. Administrative remedies include things like suspending or revoking insurance licenses, restitution to the injured party, and fines or penalties.

We are proud to announce the start of the Insurance Lawyer Blog. This new online resource is intended to help residents throughout the country stay informed of relevant legal news affecting those who have insurance disputes, fraud, and all those who have concerns about insurance related legal matters.

Our California insurance law attorney is available to help residents across the country, and have extensive experience ensuring fairness, accountability, and redress are had in even the toughest of circumstances.

Please be sure to check this blog often to learn more about a variety of important national legal issues. Also, feel free to contact our trained legal professional to learn how we might be able to help in your case. We can be reached on our main website: www.brodfirm.com or by phone at 1-800-427-7020.