McKean Evans

Getting What You Pay For With Your Insurance Premiums

People frustrated dealing with their insurance company often wonder what they’ve been buying when they paid premiums for all those years. Insurance premiums buy you a whole host of benefits beyond just the possibility the insurer might someday pay you for a covered loss. Insurance premiums buy you the promise of peace of mind and fair treatment.

Even if the insurer thinks your claim might not be covered, or even if you yourself aren’t sure if you have a claim, the insurer can’t just throw you under the bus. The insurance policy is a contract that entitles the policyholder to non-coverage benefits such as a full and fair investigation, peace of mind, or the promise of fair treatment by the insurer.

In other words, besides just coverage, your premiums buy you the insurer’s promise to:

Fully, fairly and promptly investigate, evaluate, and adjust claims (or possible claims) at the insurer’s expense (not your own);
Explain all your potential coverages and benefits under the policy to help you identify potential claims;
Search for evidence to support your claim and assist you with your claim – not sit on their hands and make you prove your right to coverage;
Not deny claims based on speculation, a hunch, or biased information;
Keep an open mind and not pre-decide the outcome of the claim;
Tell the truth about the facts or policy provisions;
Comply with applicable Washington State claims-handling regulations;
Refrain from treating you like an adversary or opponent;
Treat your interests with equal regard as the company’s own interests; and
Apply the insurance policy provisions reasonably and fairly.

Even when the insurer accepts coverage, policyholders suffer harm if the insurer unreasonably denies them these benefits. For example, when an insurer fails to adequately investigate a policyholder’s claim, the policyholder must either perform their own investigation to determine if coverage should have been provided or take no action at all. In either situation, the policyholder does not receive the full benefit they paid for under their insurance contract. Or, where the insurer pays or offers to pay only a paltry amount that is far less than what you claimed, ignores the facts (as known or, in some cases, as would have been known had the insurer adequately investigated the claim), and would not compensate the you for the loss at issue, the benefits promised in the policy are effectively denied.

When the insurer denies benefits, the policyholder does not get what they paid for, faces delays, suffers emotional stress has to conduct and pay for the investigation themselves, and has to pay lawyers and experts. Under these circumstances, the policyholder has recourse under Washington’s Insurance Fair Conduct Act and Consumer Protection Act.

Court Ruling Emphasizes Tie Goes to the Policyholder When Interpreting Insurance Policies

Washington insurance law includes a principle that if an insurance policy is ambiguous, i.e., if it can reasonably be read in multiple ways, the court will adopt the reading that is most favorable to the policyholder. This rule exists because insurance companies are sophisticated enough to draft their insurance policies the way they want, and have enough leverage over the consumer to offer their policies on a take it or leave it basis. You typically can’t haggle with your insurance company over the fine print of the exclusions in your insurance policy. Since the company can write the policy and has all the leverage compared to the policyholder, if the policy isn’t written clearly the court will read it to mean whatever a reasonable person buying insurance would expect as a matter of common sense.

The recent case Cheban v. State Farm found in favor of the policyholder by employing this rule. Cheban made a claim under his auto insurance policy for damage to his car from an accident. State Farm acknowledged there was coverage under Cheban’s auto policy’s Underinsured Motorist (UIM) coverage But State Farm disputed whether the policy covered Cheban’s loss of use of his vehicle for the 47 days the car was being repaird in addition to the repair bills.

The insurance policy provided State Farm would pay “compensatory damages for property damage.” State Farm argued this language limited State Farm’s obligation to only physical property damage, not loss of use. Chaban argued the words “compensatory damages” expanded coverage beyond “property damage” to all resulting losses, including loss of use of the car while it was repaired.

The Washington Court of Appeals determined both State Farm’s and Cheban’s interpretations were reasonable. Because the language was ambiguous, the court interpreted the policy consistent with Cheban’s expectations as the policyholder. That meant Cheban was entitled to coverage for the loss of use while the car was repaired as well as the repair bill.

The Cheban v. State Farm decision is an important remind that ambiguous insurance policies will be construed in the policyholder’s favor.

Know Your Rights – ERISA Claim Deadlines

We’ve previously blogged about the importance of meeting deadlines in your claim for benefits under an ERISA-governed insurance policy. Most ERISA plans have strict deadlines for submitting a claim, appealing the insurance company’s denial of your claim, and filing a lawsuit. The deadlines are strict and ERISA is draconian about deadlines – missing them by even a day can cause you to permanently lose your claim with no recourse.

The good news is that the insurance company and ERISA plan have to follow their own deadlines in handling claims for benefits. The federal Department of Labor, the agency with oversight over ERISA plans and insurance companies, has a regulation mandating ERISA plans and insurance companies subject to ERISA give ERISA claims full and fair review. Part of this regulation requires insurers to decide ERISA claims within certain deadlines.

For claims under ERISA-governed disability insurance policies, the insurer must decide the claim within 45 days. The insurer can extend this deadline by up to 60 days, but must show circumstances outside the insurer’s control in order to do so. Also, the insurer must notify you of the extension before the initial deadline expires. Even if the insurer gets the extension, they have to tell you the date they expect to decide your claim.

For claims under ERISA-governed group health insurance plans, the deadline depends on the type of claim. Urgent care claims must be decided within 72 hours. Claims involving an ongoing course of treatment must be decided within 24 hours. Pre-service claims must be decided within 15 days. And post-service claims must be decided within 30 days. Like disability claims, these deadlines can sometimes be extended, but only under limited circumstances.

If the insurance company misses the deadlines, there are important consequences. First, you’re entitled to file a lawsuit without waiting for the insurance company to finish its review. That means you can have your case heard by a judge weeks or months before you otherwise might. Second, once you’re in court, the court may apply greater scrutiny to the insurer’s handling of your claim because the insurer disregarded the ERISA deadlines.

Importantly – and fairly – courts are holding insurance companies to these deadlines just as strictly as they hold claimants to deadlines. In the recent case Fessenden v. Standard Reliance Life Insurance Company, the Seventh Circuit Court of Appeals held these deadlines are a “bright line”. Writing “What’s good for the goose is good for the gander,” the court determined that the insurer’s missing the deadlines by even a day violates the rule and allows the claimant to file suit immediately.

ERISA Plans Can’t Discriminate Against Domestic Partners, Court Rules

In Washington, and many other states, domestic partners enjoy the same rights and legal protections as spouses. The Ninth Circuit Court of Appeals recently confirmed that domestic partnerships’ equal treatment under state law extends to ERISA plans.

ERISA plans typically give the plan administrator broad discretion to interpret the terms of the plan. This often means the plan administrator has huge leeway in deciding who qualifies for benefits under the plan. If the plan document leaves any room for interpretation, courts often defer to the plan administrator’s decision about who gets benefits, even if the decision seems unfair or counter-intuitive.

The Ninth Circuit’s decision in Reed v. KRON/IBEW Local 45 Pension Plan ruled that ERISA plan administrators’ discretion does not extend to discriminating against domestic partners when deciding who qualifies for benefits under the plan.

In Reed, David Reed and Donald Gardner had been in a committed, long-term relationship for decades, ultimately becoming domestic partners. Gardner subsequently retired and began receiving pension benefits under the ERISA pension plan sponsored by his former employer KRON television. The KRON ERISA plan entitled the spouses of pensioners who passed away to surviving spouse benefits.

After Gardner passed away, Reed filed a claim for surviving spouse benefits. KRON’s plan administrator denied Reed’s claim. The plan administrator claimed it was within its discretion to interpret surviving spouses as excluding domestic partners.

The court acknowledged that ERISA plan administrators are entitled to broad discretion, but nevertheless ruled in Reed’s favor. The court noted state law “afforded domestic partners the same rights, protections, and benefits as those granted to spouses” and nothing in ERISA required otherwise. The Court ordered the ERISA plan to pay surviving spouse benefits to Reed.

The Reed case is an important reminder that ERISA plan administrators’ discretion is not unlimited, and also represents an important victory for domestic partners.

Washington State Bans Surprise Medical Billing

We previously blogged about the push by Washington’s Insurance Commissioner to ban so-called surprise medical billing, i.e., where an insured gets hit with a huge bill for medical treatment despite going to an in-network provider or seeking emergency care. In those circumstances, the insurer claims the hospital’s bill is too high and refuses to pay, and the hospital bills the patient for the difference. This practice (known as “balance billing”) results in the policyholder getting a huge hospital bill for medical care that was covered by their insurance policy, even if the policyholder used an in-network provider and did everything right. In these situations, the patient is stuck in the middle with the insurer and the hospital each blaming the other for the huge balance bill.

Washington’s surprise medical billing ban has now been signed into law by the Governor. The new law is touted as one of the strongest legal protections for health insurance policyholders and patients in the country.

Among other things, the surprise medical billing ban includes the following:

Bans balance billing where you receive emergency medical treatment, even if it’s at an out-of-network facility – this includes seeking emergency medical treatment in a state bordering Washington State;
Bans balance billing where you obtain treatment from an in-network provider, regardless of whether it’s an emergency;
Requires insurers to pay out-of-network providers directly (as opposed to leaving the policyholder to fend for themselves.

One of the most significant reforms is that the new law requires insurers and medical providers to resolve billing disputes between themselves, rather than leaving the patient to deal with the excess bill from the provider. This is a huge win for policyholders and patients because it means patients are no longer left holding the bag when the insurer and doctor disagree over the medical bills. Insurers and hospitals have the resources to fight medical billing disputes and the bargaining power to keep them from happening in the first place – patients do not. The new law fixes a major injustice by preventing insurers and providers from imposing on patients the burden of resolving medical billing disputes.

Washington’s surprise medical billing reform is a big step forward for patients and health insurance policyholders.