Insurance – Page 15 – Seattle Insurance and ERISA Blog

Washington Supreme Court Strikes Down “Maximum Medical Improvement” Limits in Auto Policy Coverage

On June 7, 2018, the Washington Supreme Court, in Durant v. State Farm, ruled insurers may not limit payments to policyholders under auto insurance Personal Injury Protection (“PIP”) to only treatment needed for the insured to reach “maximum medical improvement” (“MMI”).

PIP coverage is required to be offered in Washington auto insurance policies. In exchange for additional premiums, PIP coverage requires the insurer to pay for the insured’s medical expenses related to physical injuries covered under the policy. In the Durant case, State Farm’s PIP coverage contained an additional sentence: “Medical services must also be essential in achieving maximum medical improvement for the injury you sustained in the accident.”

After State Farm refused to pay medical bills State Farm claimed were not essential to MMI, Durant hired a lawyer and filed a lawsuit challenging State Farm’s limitation on PIP coverage payments for only medical bills essential to achieving MMI. Durant claimed the MMI limitation violated Washington’s insurance regulation governing PIP coverage, WAC 284-30-395(1), which limits the reasons insurers may use to deny PIP coverage.

The Supreme Court agreed with Durant. The court applied the plain language of WAC 285-30-395(1), which provides three bases on which an insurer may deny PIP claims:

“the medical and hospital services:

(a) Are not reasonable;

(b) Are not necessary;

(d) Are not incurred within three years of the automobile accident.

These are the only grounds for denial, limitation or termination of medical and hospital services permitted…”

The court determined the final sentence was conclusive: insurers may deny PIP coverage only for the four reasons identified in the regulation. Since “essential to maximum medical improvement” is not identified in the regulation, it is an invalid basis on which to deny PIP coverage.

State Farm argued the MMI limitation was part of the permissible limitation to medical services that are “reasonable” or “necessary.” But the court noted State Farm’s policy limited PIP coverage to medical bills that were “reasonable,” “necessary,” and essential to MMI. Thus, the court concluded the MMI limitation improperly exceeded the scope of the “reasonable and necessary” requirement. The court also noted Washington’s Insurance Commissioner previously warned insurers adding criteria to PIP benefit payments violates WAC 285-30-395(1).

The court confirmed WAC 285-30-395(1) and related statues “reflect Washington’s strong public policy in favor of the full compensation of medical benefits for victims of road accidents.” State Farm’s limitation unlawfully “denies Durant his PIP medical benefits necessary to return him to his pre-injury state.”

The Durant ruling clarifies an important aspect of Washington insurance law and confirms insureds’ right to coverage for medical treatment for injuries sustained in auto collisions.

How Long Do I Have To Dispute An Insurance Claim Denial?

If your insurer denies your claim or takes some action with which you disagree, how long do you have to dispute the insurer’s decision? For example, if your health insurer refuses to authorize surgery, or refuses to cover prescription drugs; your homeowner’s insurer refuses to pay the full bill for repairing your home after a fire; or your car insurer refuses to pay for damage you sustained in a crash?

Most people are probably generally aware their legal claims may be subject to specific deadlines. But confirming the specific deadline applicable to a particular insurance dispute, and the action needed to comply with the deadline, can be tricky.

The first and most important question is whether the insurance is employer-sponsored. If so, it is likely subject to a federal law called the Employee Retirement Income Security Act (“ERISA”). ERISA imposes important deadlines insureds must meet in order to preserve their right to dispute the insurer’s adverse decisions regarding payment or benefits. First, insureds have a limited period of time after receiving the insurer’s notice of an adverse benefit determination (e.g., the insurer’s letter refusing to cover treatment) in which to appeal the insurer’s decision internally. This period is often relatively short (e.g., 60, 90 or 180 days) and the specific period depends on the terms of the employee benefit plan. Second, if the insurer refuses to reconsider its denial after the internal appeal, insureds have a similarly short deadline in which to file a lawsuit disputing the insurer’s decision. Again, this deadline is often short and depends on the specific language of the employee benefit plan.

The rules differ for non-employer insurance. Insurance that is not procured through an employer is not subject to ERISA. There is no internal appeal process. Instead, insureds typically have a specific period of time from learning of a dispute (e.g., the insurer’s failure to pay benefits) in which to file a lawsuit against the insurer. The specific period of time depends on the specific claims the insured can assert, which depends on the details of the insurer’s conduct. For example, insureds typically have four years in which to sue an insurer for violations of Washington’s Consumer Protection Act. Other legal claims typically have different deadlines in which to file suit.

This is complicated by the fact most insurance policies contain a provision requiring the insured to bring suit within a shorter time, regardless of the particular claim asserted. This policy-specific limitations period is often quite short (e.g., six months) so it is critical for insureds to carefully review their policy contracts. Often, these policy-specific deadlines can be circumvented – they may apply only if the insurer can prove their investigation of the claim was harmed by the delay, and, even if so, they may not bar all claims the insured has against the insurer.

The upshot is virtually all insurance-related legal disputes are subject to deadlines by which insureds must assert specific claims or risk losing their legal rights. The specifics depend on the details. Often, even if a deadline has passed, insureds may still have legal recourse. Thus, it is critical for insureds to be mindful of any applicable deadlines regarding insurance claims and disputes, and seek advice from an attorney to confirm any applicable deadlines.

Is My Dog Covered Under My Homeowner’s Policy?

Seattle may be famously dog-friendly, but there is a lot of uncertainty about whether or to what extent dog-related injuries are covered under traditional liability policies. Homeowner’s coverage typically protects the insured against liability claims arising from injuries to other people for which the insured is legally responsible. But policyholders are increasingly learning that dog bite injuries are excluded or limited under many homeowner’s insurance policies.

A recent study found dog-bite lawsuits have risen sharply over the last several years. Dog bites were estimated to cost insurers over $9 million in Washington State in 2017. These incidents reportedly constitute over a third of all homeowner’s claims. Most claims involved dogs biting small children or other dogs. Delivery-persons are also frequently involved in dog-bites – the increase in dog-bite claims over the past years has been linked to the increased prevalence of online shopping. Many states and municipalities are adding laws making owners liable for injuries caused by their pets. Legal fees and medical bills in dog-bite cases can be significant.

Dog owners often look to homeowner’s policies for coverage. Typical homeowner’s policies cover any injuries for which the policyholder could be liable. This would seem to cover dog bites in principal, but polices often exclude injuries caused by animals entirely or limit the number of claims that can be made related to injuries caused by a single animal. Or, some policies may limit coverage for certain breeds such as pit bulls or rottweilers. In some instances, umbrella liability policies may cover pets or breeds excluded from homeowner’s coverage, but may have similar restrictions.

The upshot for dogs and their owners is to carefully review the terms of your homeowner’s coverage to confirm you have coverage if your dog injures other people or pets.

Insurers Fined for Raising Premiums Following Credit Freezes

In the wake of the multiple recent data breaches, consumers are increasingly advised to use a credit freeze to mitigate their risk of identity theft. Credit freezes reduce the risk identity thieves your identity is used to open fraudulent accounts by prohibiting the major credit reporting agencies from responding to inquiries, and effectively stopping anyone from obtaining credit in your name.

But many consumers are paying for the credit freeze in surprising ways. Washington’s Insurance Commissioner recently fined GEICO for raising premiums on insureds who froze their credit.

Insurers are generally permitted to consider consumers’ credit scores in setting premiums. Accordingly, raising premiums on consumers who effectively have no credit score because of a credit freeze is technically legal.

However, insurers must notify policyholders whose premiums are increasing due to a credit freeze. Notices must explain the insured’s premiums are increasing and provide a reason for the increase.

In GEICO’s case, the Insurance Commissioner found GEICO failed to properly notify affected insureds. While GEICO notified insureds it was raising their premiums, it failed to detail that the basis for the premium hike was the insured’s credit freeze.

In short, if your premiums recently increased, it’s worth contacting your insurer and insisting on an explanation.

Washington Court of Appeals Emphasizes Insurers May Not Categorically Ignore Their Insureds’ Treating Physicians When Deciding Whether Injuries Are Covered

Shannon Leahy found herself in a common situation when dealing with her auto insurer following a car crash. Her insurer agreed she was not at fault, but refused to pay her claim, arguing her medical treatment was unrelated to the crash. Ms. Leahy’s doctors agreed her treatment was related to the crash, but State Farm ignored Ms. Leahy’s doctors in favor of the opinions of State Farm’s “independent” medical expert who (unsurprisingly) opined Ms. Leahy’s treatment was unrelated. Can they do that?

In Ms. Leahy’s case, the answer was “no.” On May 21, 2018, the Washington Court of Appeals clarified that insurers may not ignore the opinions of their insureds’ physicians when making coverage determinations in Leahy v. State Farm Mutual Automobile Insurance Company, No. 76272-9-I.

Ms. Leahy was injured when her vehicle was struck from behind. The other driver was at fault, but had insufficient insurance to cover Ms. Leahy’s injuries. Accordingly, Ms. Leahy made a claim with her auto insurance carrier State Farm, with whom she had coverage for Personal Injury Protection (“PIP”) and Underinsured Motorist coverage (“UIM”).

Ms. Leahy was still receiving treatment from her injuries about two years after the crash. State Farm asked her to undergo a medical exam with a third party doctor chosen by State Farm to determine whether her ongoing treatment was medically necessary. State Farm’s third party doctor, Dr. Lecovin, determined Leahy’s treatments were excessive. Thereafter, State Farm determined it would no longer cover Ms. Leahy’s treatment under her PIP coverage.

State Farm also disputed whether Ms. Leahy’ UM policy covered her injuries. State Farm’s adjuster concluded Ms. Leahy’s injuries were not caused by the collision. Ms. Leahy claimed the crash aggravated her pre-existing medical condition and thus that the aggravated injury was covered.

The dispute went to trial, at which the jury found in favor of Leahy. State Farm paid the policy limits. Ms. Leahy asserted new claims for bad faith premised on State Farm’s handling of her claim. The trial court dismissed Ms. Leahy’s claims and she appealed.

On appeal, the Court of Appeals reinstated Ms. Leahy’s claims. The court determined State Farm arguably violated the law by failing to consider the opinions of Ms. Leahy’s treating physicians that her injuries were aggravated by the crash. Ms. Leahy’s physicians were both board-certified rheumatologists and University of Washington faculty. The court determined there was a reasonable dispute whether State Farm could simply ignore their opinions. At minimum, Ms. Leahy was entitled to have a jury decide whether State Farm’s conduct was reasonable.

The court also determined State Farm’s low offer compared to Ms. Leahy’s recovery at trial could potentially show State Farm acted in bad faith. The court emphasized the proper analysis was what State Farm knew at the time it made the offer, not after trial. Given the evidence showed a legitimate conflict between State Farm’s position that Ms. Leahy’s injuries were mostly unrelated to the crash and the opinions of Ms. Heahy’s treating physicians, the court determined Ms. Leahy was entitled to a trial on this issue.

In sum, the Leahy decision is an important win for Washington policyholders because it emphasizes insurers may not categorically ignore the opinions of the insured’s treating physicians in order to deny coverage.