Justia Insurance Law Opinion Summaries

Hayssen and its employees were parties to a Plant Closing Agreement that promised medical benefits upon retirement. In 1996, Bemis acquired Hayssen and assumed its obligations. Bemis reduced benefits under the Agreement: increasing co-pays and deductibles and eliminating its prescription drug program. Former employees sued under the Employee Retirement Income Security Act, 29 U.S.C. 1132, and the Labor-Management Relations Act, 29 U.S.C. 185(a). The court certified a class, but granted summary judgment to Bemis, reasoning that the Agreement did not establish a lifetime interest in a certain level of benefits. About a month later, Bemis eliminated all medical benefits under the Agreement. The Seventh Circuit reversed, concluding that the parties intended to provide lifetime medical coverage. On remand, the court granted a preliminary injunction forcing Bemis to restore the benefits eliminated in 2009 and provide a basic Medicare Part D drug benefit. The court awarded fees and costs, finding that the company’s position was not substantially justified. The judge struck billing entries that were vague or for time not reasonably expended on the case, concluded that the lawyers’ billing rates were reasonable, and calculated the lodestar amount to reach an award of $403,053.75, for four years of advocacy, including an appeal and trial preparation. The Seventh Circuit affirmed.View "Temme v. Bemis Co., Inc." on Justia Law

In 2011, Michigan passed the Health Insurance Claims Assessment Act, Mich. Comp. Laws 550.1731–1741, to generate revenue needed to fund its obligations under Medicaid. The Act functions by imposing a one-percent tax on all “paid claims” by “carriers” or “third party administrators” to healthcare providers for services rendered in Michigan for Michigan residents. “Carriers” include sponsors of “group health plan[s]” set up under the strictures of the Employee Retirement Income Security Act, 29 U.S.C. 1002–1461. On top of the tax, every carrier and third-party administrator paying the tax must submit quarterly returns with to the Michigan Department of the Treasury and “keep accurate and complete records and pertinent documents as required by the department.” Every carrier and third-party administrator must also “develop and implement a methodology by which it will collect the [tax]” subject to several conditions. SIIA sought a declaratory judgment that ERISA preempted the Act, and an injunction, to prevent implementation and enforcement of the Act against the ERISA-covered entities. The district court dismissed, concluding that the Act did not offend ERISA’s express preemption clause because the Act did not “relate to” an ERISA-governed benefit plan. The Sixth Circuit affirmed, finding that the statute escapes the preemptive reach of ERISA.View "Self-Ins. Inst. of Am., Inc. v. Snyder" on Justia Law

In 2010, plaintiffs and Tidyman’s Management Services Inc. (TMSI) filed a complaint against Michael A. Davis and John Maxwell in their capacities as officers and directors of TMSI and/or its subsidiary, Tidyman’s LLC, alleging breach of corporate duties arising out of a merger between TMSI and SuperValu, which created Tidyman’s LLC. Plaintiffs requested punitive damages and attorney fees. The merger at issue occurred despite advice from a financial advisor TMSI had retained that the company should be sold, and the complaint alleged that the directors and officers had misrepresented the merit of the transaction. TMSI is a Washington corporation with its principal place of business in Montana, and was a member of Tidyman’s LLC; employee shareholders owned TMSI. A corporate liability insurance policy was in place that purported to insure Davis and Maxwell against liability incurred in their positions as officers and directors of Tidyman’s LLC. The Policy was to provide a legal defense for Davis and Maxwell throughout the federal ERISA litigation. The issues this case presented to the Montana Supreme Court were: (1) whether the District Court was correct in concluding Montana law, rather than Washington law, applied in this case; (2) whether the District Court erred in concluding that the corporate liability insurer breached its duty to defend without analyzing coverage under the policy; (3) whether the District Court erred in denying the insurer a hearing and discovery on reasonableness and collusion related to the stipulated settlements; and (4) whether the District Court erred by awarding pre-judgment interest, or in its determination of when the interest began accruing. The Montana Court concluded that genuine issues of material fact regarding reasonableness precluded summary judgment on the amount of the stipulated settlements. Accordingly,the Court reversed judgment on the stipulated settlements and remanded this case for further proceedings. The Court affirmed on all other issues. View "Tidyman s et al. v. Davis et al." on Justia Law

Plaintiffs challenged an insurance company's use of "retained asset accounts" (RAAs) as a method of paying life insurance benefits in the ERISA context. They presented the district court with two basic questions: (1) whether the insurer's method of paying death benefits in the form of RAAs constitute self-dealing in plan assets in violation of ERISA section 406(b); and (2) whether this redemption method offended the insurer's duty of loyalty toward the class of beneficiaries in violation of ERISA section 404(a). The district court answered the first question in favor of the insurer and the second in favor of the plaintiff class. The court then awarded class-wide relief totaling more than $12,000,000. Both sides appealed. Upon review, the First Circuit Court of Appeals agreed with the district court that the insurer's use of RAAs in this case did not constitute self-dealing in plan assets. However, the Court disagreed with the district court's answer to the second question and held that the insurer's use of RAAs did not breach any duty of loyalty owed by the insurer to the plaintiff class. View "Merrimon, et al v. Unum Life Insurance Company" on Justia Law

Central States, an employee benefit plan governed by the Employee Retirement Income Security Act, provides health insurance for Teamsters and their families. Guarantee Trust provides sports injury insurance for student athletes. Each of 13 high school and college athletes, all children of Teamsters, holds general health insurance from Central and sports injury insurance from Guarantee. Each suffered an injury while playing sports (most often football) between 2006 and 2009, and sought coverage from both companies. Each time Guarantee refused to pay the athlete’s medical expenses, and each time Central paid the bill under protest. The district court entered a declaratory judgment under ERISA, 29 U.S.C. 1132(a)(3)(B), that, when coverage of student athletes overlap, Guarantee must pay, and ordered Guarantee to reimburse Central for the payouts to the 13 students. The Sixth Circuit, affirmed in part characterizing the case as a “you first” paradox, or ‘gastonette.” An ERISA plan may coordinate benefits with another policy, but may not redefine the coverage of another policy. Absent the Central plan, the Guarantee policy would cover the sports injuries at issue without question. An ERISA plan must keep doing what it would do in another plan’s absence. That amounts to coordinating benefits, not redefining coverage. View "Cent St, SE & SW Areas Health & Welfare Fund v. First Agency, Inc." on Justia Law

Hi-Lex has about 1,300 employees. Blue Cross Blue Shield of Michigan (BCBSM) served as a third-party administrator (TPA) for Hi-Lex’s Health and Welfare Benefit Plan since 1991. Under the Administrative Services Contracts (ASCs) between the parties, BCBSM agreed to process healthcare claims for Hi-Lex employees and grant those employees access to BCBSM’s provider networks. BCBSM received an “administrative fee” set forth in ASC Schedule A on a per-employee, per month basis. In 1993, BCBSM implemented a new system, “retention reallocation,” to retain additional revenue. Regardless of the amount BCBSM was required to pay a hospital for a given service, it reported a higher amount that was then paid by the self-insured client. Hi-Lex allegedly was unaware of the retention reallocation until 2011, when BCBSM disclosed the fees in a letter and described them as “administrative compensation.” Hi-Lex sued, alleging breach of fiduciary duty under the Employee Retirement Income Security Act, 29 U.S.C. 1104(a). The court awarded Hi-Lex $5,111,431 in damages and prejudgment interest of $914,241. The Sixth Circuit affirmed that: BCBSM was an ERISA fiduciary and breached its fiduciary duty under ERISA section 1104(a), that BCBSM conducted “self-dealing” in violation of section 1106(b)(1), and that Hi-Lex’s claims were not time-barred. View "Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of MI" on Justia Law

Plaintiffs worked until 2006, when the plant closed, and retired under a collective bargaining agreement (CBA); that provided that the employer would provide health insurance, either through a self-insured plan or under a group insurance policy and identified the employer’s contribution to the premium. The CBAs provided that the coverage an employee had at the time of retirement or termination at age 65 or older other than a discharge for cause “shall be continued thereafter provided that suitable arrangements for such continuation[] can be made… In the event… benefits … [are] not practicable … the Company in agreement with the Union will provide new benefits and/or coverages as closely related as possible and of equivalent value." In 2011 TRW (the employer’s successor) stated that it would discontinue group health care coverage beginning in 2012, but would be providing “Health Reimbursement Accounts” (HRAs) and would make a one-time contribution of $15,000 for each eligible retiree and eligible spouse in 2012, and in 2013, would provide a $4,800 credit to the HRAs for each eligible party. The HRAs shifted risk, and potentially costs, to plaintiffs. TRW did not commit to funding the HRAs beyond 2013. Plaintiffs sued, claiming that the change breached the CBAs, in violation of the Labor-Management Relations Act, 29 U.S.C. 185, and the Employee Retirement Income Security Act, 29 U.S.C. 1001. The district court certified a class and granted summary judgment, ruling that the CBAs established a commitment to lifetime health care benefits. The Sixth Circuit affirmed View "United Steel, Paper, Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv. Workers Int'l Union v. Kelsey-Hayes Co." on Justia Law

Nicole discovered Shawn’s body in their Ohio home. Shawn had gone out drinking the night before, while Nicole spent the night at a friend’s house. The Medical Examiner’s Office reported the cause of death as “[a]sphyxia by extreme and restricted position (positional asphyxia)” and the manner of death as “[a]cute ethanol intoxication ... ACCIDENT: Prolonged and extreme hypertension of neck and torso while intoxicated.” Shawn’s blood-alcohol level at the time of autopsy was .22%. Nicole filed a $212,000 claim for accidental-death benefits with the Plan, which covers “injury” as a result of an “accident,” defined as “an unintended or unforeseeable event or occurrence which happens suddenly and violently.” No benefits will be paid if the “Covered Person [is] deemed and presumed, under the law of the locale … to be under the influence of alcohol or intoxicating liquors.” Nationwide directed denial of Nicole’s claim, citing Exclusion 12, but quoting an earlier version that provided: “The Covered Person being deemed and presumed … to be driving or operating a motor vehicle while under the influence…” Later, based on amended Exclusion 12, Nationwide upheld the denial; its appeals panel affirmed. Nicole filed suit, asserting claims under the Employee Retirement Income Security Act and a common-law breach-of-fiduciary-duty claim. The district court entered judgment in favor of the defendants, but agreed with Nicole that the appeals panel had breached its statutory duty to provide her with Plan-related documents upon written request, and imposed a penalty of $55 per day ($8,910). The Sixth Circuit affirmed. View "Cultrona v. Nationwide Life Ins. Co." on Justia Law

Lewis was injured in an automobile accident and her health plan paid $180,000 for her medical treatment Lewis filed a tort suit against the driver (her son-in-law), represented by Georgia lawyer Lashgari, and obtained a $500,000 settlement. Lashgari knew the plan had a subrogation lien, but split the proceeds between himself and Lewis. He claimed that the plan was owed nothing. The plan filed suit under ERISA to enforce the lien, 29 U.S.C. 1132(a)(3). The defendants argued that because the settlement funds have been dissipated, the suit was actually for damages, not authorized by ERISA. The district judge ordered the defendants to place $180,000 in Lashgari’s trust account pending judgment. The defendants did not comply. A year later, the defendants having neither placed any money in a trust account nor produced any evidence of their inability to pay, the judge held them in civil contempt, ordered them to produce records that would establish their financial situations, and ordered Lashgari to documents relating to the contempt to the General Counsel of the State Bar for possible disciplinary proceedings against him. The defendants appealed the contempt order. The Seventh Circuit dismissed, characterizing the appeal as frivolous and the defendants’ conduct as outrageous. View "Cent. States, SE & SW Areas Health & Welfare Fund v. Lewis" on Justia Law

The Commission appealed the district court's order preliminarily enjoining him from enforcing several provisions of the Georgia Code as preempted by Section 514 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1144(a). The court found that AHIP had standing to challenge Section 4, 5, and 6 of the Insurance Delivery Enhancement Act of 2011 (IDEA), O.C.G.A. 33-24-59.5; AHIP's suit was not barred by the Tax Injunction Act, 28 U.S.C. 1341; AHIP was likely to succeed on the merits of its claims where the challenged IDEA provisions were preempted by ERISA Section 514; and the district court did not abuse its discretion in concluding that AHIP met its burden to show irreparable injury and that the balance of equities weighed in favor of a preliminary injunction. Accordingly, the court affirmed the judgment of the district court. View "America's Health Ins. Plan v. Hudgens" on Justia Law