McKean Evans

The Fine Print Matters In Insurance Coverage Disputes

Many insurance disputes revolve around the fine print of the policy. Unfortunately, the policy’s specific language may define important terms differently from what the insured understood or was led to believe. This was the case in the Seventh Circuit Court of Appeals’ recent decision in Fiorentini v. Paul Revere Life Insurance Company.

In Fiorentini, the plaintiff became disabled during aggressive cancer treatment. The insurer affirmed coverage and paid disability benefits while the plaintiff remained unable to work. But a dispute arose after the plaintiff went back to work. The insurer argued the plaintiff was no longer disabled since he had returned to work, but the plaintiff argued he remained disabled because, despite being back at work, he still could not perform all of his job duties. Specifically, the plaintiff argued that while he could perform most job duties, aftereffects of his cancer treatment left him unable to meet face-to-face with potential clients.

The plaintiff relied on the policy’s definition of “total disability” which provided the plaintiff was disabled if he was “unable to perform the important duties” of his job. The plaintiff argued that meeting in person with potential client was an important duty. Hence, the plaintiff claimed that being unable to meet in person with potential clients rendered him disabled even admitting he could do all the other functions of his job.

The court read the policy differently. The court interpreted the definition of disability to cover only the “inability” to do important job duties, not merely a “diminished” ability to perform. The court concluded that even assuming the plaintiff’s ability to meet face-to-face with potential clients was diminished by the aftereffects of his cancer treatment, the client was not totally unable to perform his job duties. Since the court decided that meeting in person with new clients was not essential to the plaintiff’s job, being unable to meet with new clients only diminished the plaintiff’s ability to perform his duties – it did not render the plaintiff unable to perform his duties.

In short, the court parsed the policy fine print in a way that undercut the insured’s expectations about what would be covered. The Fiorentini decision illustrates the importance that policyholders carefully scrutinize policy language to learn their rights.

Pet Insurance: Read The Fine Print

Great Danes might be the best dogs – they’re calm, require relatively little exercise and space, and are super affectionate towards their human family. Unlike a lot of needier breeds who need constant activity, Danes reputedly just want to chill with you on the sofa.

The problem with Great Danes is they’re prone to significant, protracted health problems that get incredibly expensive – partly due to their large size and partly due to their susceptibility to congenital and hereditary disorders. Thus, in researching the pros and cons of owning a Dane, I was repeatedly advised “buy pet insurance!” That got me thinking whether pet insurance is actually a good deal or a scam preying on cost-conscious pet owners.

Apparently pet insurance, whatever its benefits, has caught the ire of Washington State’s Insurance Commissioner for some pretty significant problems. One company was found to have violated state law more than 600 times. Among other things, the pet insurer:

Illegally failed to give new policyholders copies of their policy contracts;
Misrepresented the policy coverage in its marketing and advertising materials;
Failed to cancel policies after pets died or the policyholder no longer owned the pet;
Sold policies under a fake name, preventing consumers from identifying the company when they had complaints;
Misled consumers about under what circumstances the company would refund premiums;
Ignored consumer complaints;
Sold insurance through unlicensed brokers; and
Failed to explain the reasons for refusing to renew coverage.

Pet insurance also tends to come with significant exclusions. Pre-existing condition exclusions are unsurprising. But some policies also exclude “wellness” care and expenses “not directly related to veterinary service” – super ambiguous terms with lots of room for fine print and interpretation that could give the company a basis to deny coverage.

Similarly, some insurance excludes hereditary or congenital disorders – a major drawback if your pet is of a breed (like Great Danes) that are notoriously subject to such diseases.

The upshot is to do your diligence and research the company and your coverage carefully before buying pet insurance, and to double check the policy fine print on your existing coverage to be sure you have the coverage you thought you bought.

The Moral High Ground Is Crucial In Insurance Disputes, Confirms Ninth Circuit

In any lawsuit, but particularly an insurance dispute, it’s important to have the “moral high ground.” In an insurance case, this means cooperating with the insurer and responding to the insurer’s reasonable requests for information. Even where the insured is in the right, insurers often seize on the insured’s failure to provide information about their claim or otherwise cooperate in the insurer’s investigation to justify denying coverage or payments. Even where the insurer is acting unreasonably, failing to cooperate with the insurer gives the insurer a pretext to justify its conduct.

This was emphasized in the Ninth Circuit Court of Appeals’ recent decision in Birdgham-Morrison v. National General Assurance Company. Ms. Birdgham-Morrison sued her insurer National General for failing to pay the full amount needed to cover her injuries sustained in a car crash under her Underinsured Motorist (“UIM”) coverage.

Ms. Birdgham-Morrison’s problem was the insurer was able to leverage her failure to provide the insurer more information about her injuries to justify refusing to pay the full amount of her claim. The court noted the insured’s lawyer sent letters to National General demanding it pay the claim, but did not include specific information about her injuries. Similarly, the court noted the plaintiff never responded to the insurer’s requests for additional information about her injuries.

Accordingly, the court ruled that National General did not violate Washington’s Insurance Fair Conduct Act in denying the full amount of Ms. Birdgham-Morrison’s claim.

This case illustrates the unfortunate reality that insureds must be able to show they went above and beyond in assisting the insurer with investigating their claim if they want to get the full policy coverage they paid for.

Unfair Health Insurance Billing Practices Highlighted in NPR Report

An NPR report from earlier this spring highlights many of the disputes individuals often have with their health insurance. The article highlights one person’s experience getting a $70,000 bill for a single surgery despite the hospital being “in network” with his insurer. Both Medicare and medical billing nonprofits estimate the cost of the procedure at less than half that. Among other things, the patient was charged $26,068 for a device for which the manufacturer charges $1,500. Besides the “sticker shock,” the bill also contained charges for physical therapy sessions that never took place and drugs the patient never received.

The insurer reviewed the charges and payments twice — both times standing by its decision to pay the bills. The insurer claimed payment was appropriate based on the details of the insurance plan. The hospital declined to substantiate the charges and simply noted that they “are consistent with the hospital’s pricing methodology.”

The article points out that some insurers have an incentive to inflate the amounts the agree to pay “in network” doctors and hospitals. The Affordable Care Act mandates insurers allocate 80% of their premiums to medical care. Unscrupulous insurers can dodge this rule and inflate their profits by agreeing to high network rates with hospitals.

Or, in other instances, insurers may agree with hospitals to pay higher fees on some procedures in exchange for favorable deals on other charges. This can be problematic for insureds, who lack access to these negotiated rates prior to agreeing to undergo treatment.

In the case highlighted in the NPR article, the insured was actually a health care consultant. He used his detailed knowledge of the system to fight the bill, eventually going to court and negotiating a partially reduced payment.

These cases often come down to the specific language of the health insurance plan and the plan’s contract with the hospital. Unfortunately, individual insureds typically lack the expertise, resources and time to fight these battles.

ERISA Plan Cannot Recover Overpayments Resulting From The Plan’s Own Mistake

Most employee benefit plans (e.g., employer-sponsored health or disability insurance) allow the plan to recover excess overpayments it provides the insured. This typically occurs where the plan provides benefits that are duplicated by another source of funding. For instance, most long-term disability plans provide that benefit payments are offset by amounts the insured receives from a Social Security Disability claim. These provisions are generally enforceable.

The Ninth Circuit Court of Appeals recently refused to uphold the plan’s right to repayment where the overpayment was due to the plan’s own error. In its unpublished decision in Mrkonjic v. Delta Family-Care and Survivorship Plan, the court held Delta’s employee benefit plan could not recover overpayments from Myrkonjic caused by Delta’s improper denial of Myrkonjic’s initial claim for benefits.

Myrkonjic became disabled following a work injury and applied for long-term disability (“LTD”) benefits from his employer Delta’s employee benefit plan. Delta denied Myrkonjic’s claim. During the ensuing thirteen-year lawsuit over Myrkonjic’s right to LTD benefits, Myrkonjic took early retirement under Delta’s retirement plan in order to provide a source of income during the period he could not work and was not receiving LTD payments.

After years of litigation, Delta agreed Myrkonjic was entitled to LTD benefits. But Delta subtracted from Myrkonjic’s LTD payments amounts Delta had paid him in early retirement benefits, relying on language in the governing plan documents permitting Delta to make an offset accounting for duplicative benefits. Delta’s calculation of Myrkonjic’s offsets differed from the manner in which Delta typically calculated offsets: “Normally…If the offsets exceed the benefit, the claimant receives nothing but does not owe excess offsets back to the Plans. The Plans concede that they calculated Myrkonjic’s LTD benefits inconsistently with their normal method.”

The Ninth Circuit determined Delta’s offset calculation was improper. Noting “Myrkonjic would up in federal court in the first place” and “was forced to elect early retirement” “because the Plans improperly refused to approve his LED application”, the court ruled the Plans should have resolved the offset “so as to leave Myrkonjic no worse off from their mistakes.”