Justia Insurance Law Opinion Summaries

UnitedHealthcare Medicare Advantage insurers challenged the Overpayment Rule, promulgated by the Centers for Medicare and Medicaid Services (CMS) under 42 U.S.C. 1301-1320d-8, 1395-1395hhh, in an effort to trim costs. The Rule requires that, if an insurer learns that a diagnosis submitted to CMS for payment lacks support in the beneficiary’s medical record, the insurer must refund that payment within 60 days. UnitedHealth claims that the Overpayment Rule is subject to a principle of “actuarial equivalence,” and fails to comply. Two health plans that pay the same percentage of medical expenses are said to have benefits that are actuarially equivalent.The D.C. Circuit rejected the challenge. Actuarial equivalence does not apply to the Overpayment Rule or the statutory overpayment-refund obligation under which it was promulgated. Reference to actuarial equivalence appears in a different statutory subchapter from the requirement to refund overpayments; neither provision cross-references the other. The actuarial-equivalence requirement and the overpayment-refund obligation serve different ends. The actuarial-equivalence provision requires CMS to model a demographically and medically analogous beneficiary population in traditional Medicare to determine the prospective lump-sum payments to Medicare Advantage insurers. The Overpayment Rule, in contrast, applies after the fact to require Medicare Advantage insurers to refund any payment increment they obtained based on a diagnosis they know lacks support in their beneficiaries’ medical records. View "UnitedHealthcare Insurance Co v. Becerra" on Justia Law

Plaintiffs filed a claim on their homeowners' insurance policy with Travelers after a fire at their home. Travelers made some early payments; plaintiffs asserted that much more was owed; the parties agreed to an appraisal; the appraisal award came in closer to plaintiffs' view of the damages; and Travelers paid the additional amount.The Fifth Circuit held that the payment of the appraisal award prevents a plaintiff from continuing to pursue a breach of contract claim against an insurer. The court also held that an insurer can be liable under the Texas Prompt Payment of Claims Act for failing to timely pay the full damages it owed even though it timely made sizeable payments in response to the claim. The court explained that payment and acceptance of an appraisal award means there is nothing left for a breach of contract claim seeking those same damages. But a plaintiff may still have a claim under the prompt payment law after it accepts an appraisal award. Furthermore, the Supreme Court of Texas recently held that even a preappraisal payment that seemed reasonable at the time does not bar a prompt-payment claim if it does not "roughly correspond" to the amount ultimately owed. See Hinojos v. State Farm Lloyds, 619 S.W.3d 651, 658 (Tex. 2021).In this case, the court affirmed the dismissal of the contract claims where there is no evidence that Travelers failed to pay any amounts due and plaintiffs failed to explain why the amount paid was insufficient. However, in light of Hinojos, the court concluded that Travelers' preappraisal payment is not a defense to liability under the Texas Prompt Payment of Claims Act. Therefore, plaintiffs' claim seeking interest for late payment of dwelling coverage must be remanded. View "Randel v. Travelers Lloyds of Texas Insurance Co." on Justia Law

At issue before the Mississippi Supreme Court in this interlocutory appeal was whether the trial court erred by finding cause to grant a 120-day extension of time to serve process on Progressive Gulf Insurance Company. Plaintiffs, Jaswinder Kaur, Harvinder Singh, Karanveer Kamboj, and Gurdev Kamboj, were occupants of a vehicle that was involved in a collision with a vehicle operated by Mary Orebo and owned by Cassandra Mann. Plaintiffs’ vehicle had uninsured-motorist coverage provided by Progressive Gulf Insurance Company. Each Plaintiff filed a separate suit against all three Defendants on the eve of the expiration of the three-year statute of limitations. Progressive contended that difficulty locating other Defendants, the owner and driver of the vehicle, was not adequate cause. After review, the Supreme Court concluded the circuit court did not abuse its discretion in that decision. However, all parties agreed that the circuit court erred by refusing to dismiss the suits of three of the Plaintiffs who failed to seek extensions of time to serve process on Progressive before the end of the original 120-day period. View "Progressive Gulf Insurance Company v. Kaur, et al." on Justia Law

Plaintiffs, domestic entities, entered into an insurance contract providing coverage for a Texas townhome complex that they own and operate. The Policy was underwritten by Lloyd’s, members of a foreign organization, and contains a mandatory arbitration provision, providing that the seat of the Arbitration shall be in New York and the Arbitration Tribunal shall apply the law of New York. In 2017, Hurricane Harvey caused an estimated $5,660,000 in damages to the townhome complex. A third-party claims administrator for Lloyd’s concluded that the Policy’s deductible was $3,600,000.Plaintiffs filed a complaint in the Western District of Washington asserting breach of contract, failure to communicate policy changes, and unfair claims handling practices in violation of Washington law, asserting that the deductible should be $600,000. Lloyd’s moved to compel arbitration and stay proceedings, arguing that the Policy’s arbitration provision falls within the scope of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Plaintiffs did not contest that the arbitration provision falls within the Convention’s scope but argued the provision is unenforceable because Washington law specifically prohibits the enforcement of arbitration clauses in insurance contracts. Plaintiffs cited the McCarran-Ferguson Act, 15 U.S.C. 1011–15, which provides that state insurance law preempts conflicting federal law. On interlocutory review, the Ninth Circuit upheld an order granting Lloyd’s motion. Article II, Section 3 of the Convention is self-executing, and therefore is not an “Act of Congress” subject to reverse-preemption under the McCarran-Ferguson Act. View "CLMS Management Services Limited Partnership v, Amwins Brokerage of Georgia" on Justia Law

The Second Circuit affirmed the district court's judgment sustaining the final determination of Hartford Life with respect to plaintiff's disability benefits under the terms of the long term disability plan.The court held that California Insurance Code 10110.6(a) applies only to the claims of California residents. It does not apply to plaintiff because he was a New York resident at all relevant times. The court also held that "full and fair review" under the Employee Retirement Income Security Act's (ERISA) claims-procedure regulations does not require the claims administrator to produce documents developed or considered during the appeal from the initial determination while the claim is still under review and before a final benefits determination. Therefore, plaintiff cannot establish that Hartford Life did not provide his claim a full and fair review. In this case, the district court correctly reviewed Hartford Life's determination under the arbitrary-and-capricious standard and correctly concluded that the final determination was reasonable and supported by substantial evidence in the record. View "Mayer v. Ringler Associates Inc. and Af." on Justia Law

Maryam Hedayati appealed the grant of summary judgment in favor of Interinsurance Exchange of the Automobile Club (Auto Club or the Club) on Hedayati’s breach of good faith and fair dealing claim. Hedayati suffered catastrophic injuries in October 2012 when Auto Club’s insured ran a red light and struck her in a pedestrian crosswalk. The insured driver immediately notified Auto Club of the accident and authorized the Club to disclose his policy limits ($25,000); he also informed Auto Club he had no other insurance or assets. Auto Club’s policy with its insured required him to relinquish to the Club his right to negotiate settlement of potential tort claims falling within the policy. When he inquired about a release, Auto Club inaccurately told its insured driver Hedayati was not willing to sign one. Despite repeated requests during settlement negotiations from Hedayati’s attorney, Auto Club initially declined to disclose the insured’s policy limits; eventually it acquiesced, but Auto Club still declined to provide written proof of those limits, which the Club knew was common practice to facilitate a settlement. Auto Club then withheld from Hedayati’s counsel the insured’s written declaration which indicated he had no other insurance, which the Club had confirmed, and the insured’s statements that he had no assets. Auto Club also, despite multiple requests from Hedayati’s lawyer, failed to provide a copy of its insured’s policy which Hedayati’s lawyer needed to verify its terms. Hedayati’s counsel had demanded a hard copy of the policy as a settlement condition. Auto Club ultimately failed to settle the matter within its $25,000 policy limits. Hedayati subsequently obtained a $26 million judgment against the insured driver, along with assignment of the insured’s claim against the Club for breach of the covenant of good faith and fair dealing implicit in its policy with him. The trial court concluded the evidence presented by Hedayati was insufficient as a matter of law. After its de novo review, the Court of Appeal disagreed with the trial court’s evaluation of the evidence. It therefore reversed the summary judgment ruling and remanded for further proceedings. View "Hedayati v. Interinsurance Exchange of the Auto. Club" on Justia Law

After sustaining injuries in a vehicle driven by her son, Kevin Simms, Petitioner Belinda Pickens sought UM coverage through her policy with Respondent United Services Automobile Association (USAA). At the time of the accident, Pickens's policy covered five vehicles, including the 1997 Chevrolet involved in the accident. The policy included liability, personal injury protection (PIP), UM, and underinsured motorist (UIM) coverage. Pickens also executed a named driver exclusion. Pickens's declarations page also contained a provision that stated, "***COVERAGES EXCLUDED WHEN ANY VEHICLE OPERATED BY KEVIN SIMMS***." USAA denied Pickens's claim and initiated a declaratory judgment action asserting she was not entitled to UM coverage because Simms, the excluded driver, was operating the vehicle at the time of the accident. Pickens sued USAA and lost. The issue this case presented for the South Carolina Supreme Court's review centered on whether Section 38-77-340 of the South Carolina Code (2015) permitted a named driver exclusion that precluded uninsured motorist (UM) coverage to a passenger injured in an accident involving an unknown driver. The Court held that it did. "As the circuit court noted, no liability coverage would have been afforded to a third party had Simms been at fault, and thus, it would violate public policy to allow Pickens to recover UM when she was the person who executed the exclusion yet knowingly allowed Simms to drive her vehicle." View "United Services Automobile Association v. Pickens" on Justia Law

Two female students brought claims under Title IX, 20 U.S.C. 1681–88, alleging that the School District failed to prevent and inappropriately responded to sexual misconduct by a male student. The incidents occurred while the District did not have insurance coverage for sexual misconduct and molestation. After the District settled the suit for $1.5 million, its insurers sought a declaration of their rights and obligations under the District’s errors-and-omissions coverage. The district court held that the errors and omissions coverage applies although the policy contains a sexual misconduct exclusion. The judge stated that the exclusion was ambiguous and could be read to exclude only sexual misconduct by a school employee and might not bar coverage for “reactions to” a student’s sexual misconduct.The Seventh Circuit reversed. The sexual-misconduct exclusion is not ambiguous in precluding coverage for “[a]ny” sexual misconduct or molestation of “any person” and related allegations. Even if the sexual-misconduct exclusion barred only coverage for employees’ actions, the exclusion still applies. The District is not directly liable for misconduct by students. A school district can be liable for discrimination in cases of student-on-student sexual misconduct under Title IX only if the district has notice and is deliberately indifferent. By excluding coverage for “allegations relating” to sexual misconduct, the exclusion necessarily bars coverage for “reactions to” sexual misconduct. View "Netherlands Insurance Co. v. Macomb Community Unit School District" on Justia Law

Nationwide Mutual Insurance Company issued two public-official bonds as surety for Eddie Carthan, a member of the Holmes County, Mississippi Board of Supervisors. On appeal, the State Auditor claimed Nationwide was liable under both bonds. The undisputed facts showed the Board never paid the premium for the first bond, which was only for a year. Instead, the Board asked if the first bond could be “converted” to a four-year bond that would cover Carthan’s entire term. Nationwide complied with the Board’s request. It cancelled the first bond and issued a second bond covering Carthan’s entire term for which the Board paid the premium. After review, the Mississippi Supreme Court found no evidence that Carthan was actually secured simultaneously by two separate bonds. Rather, the Court found the undisputed facts showed the Board intended to procure and did in fact obtain one public-official bond in the amount of $100,000 as surety for Carthan. Because Nationwide paid $100,000 under the second, paid-for bond, the chancellor did not err by granting Nationwide summary judgment on all claims based on the first bond. View "White v. Nationwide Mutual Insurance Company" on Justia Law

The issue central to this appeal centered on a “covenant judgment” arrangement: an insured defendant, facing suit by a plaintiff, settles claims without the insurer’s consent in exchange for a release from liability and assignment of potential bad faith claims against the insurer to the plaintiff. If the trial court deems the settlement reasonable, that settlement amount becomes the presumptive measure of damages in the later bad faith action brought by the plaintiff against the insurer. Insurer Cincinnati Specialty Underwriters (Cincinnati), challenged the trial court’s order approving as reasonable a $1.7 million settlement between plaintiffs, Anna and Jeffrey Wood (Woods), and Cincinnati’s insureds, Milionis Construction Inc. (MCI) and Stephen Milionis. A divided Court of Appeals held the trial court abused its discretion because the reasonableness finding credited a defense expert’s evaluation of contract damages at $1.2 million despite other evidence in the record suggesting the defense’s evaluation of damages never rose above $399,000. The Washington Supreme Court reversed and reinstated the trial court’s order. The Supreme Court found the trial court properly conducted the reasonableness hearing and evaluated the varied and conflicting evidence of contract damages. In addition, the court appropriately considered damages for plaintiffs’ extracontractual claims as well as allowable attorney fees. "In finding an abuse of discretion, the Court of Appeals majority misapprehended parts of the record and substituted its assessment of the competing damages evaluations for the trial court’s assessment." View "Wood v. Milionis Constr., Inc." on Justia Law