Articles Posted in Insurance Law

As shown in recent blog postings, our San Francisco insurance attorneys follow all the relevant legal and political developments in insurance law, particularly as they affect Californians. This blog has covered potential changes to laws relating to automobile insurance, flood insurance, and insurance coverage for autism, to name a few. Another interesting development in California insurance law is Assembly Bill 1734 introduced by Assemblyman Curt Hagman in February.

This bill proposes to provide choices to policyholders when an insurance company becomes insolvent and is liquidated by the state. It also would, if enacted, provide the policyholders with information regarding their claims, the financial security of the company in liquidation, and the expected length and result of the liquidation. In general, liquidation of these companies and sorting out payment for claims and paying creditors can take a decade or more.

When an insurance company becomes insolvent, the Insurance Commissioner terminates the business by cancelling policies and not issuing or renewing policies. Then, if it is determined that the company cannot be rehabilitated or saved, the assets of the company are transferred to the California Department of Insurance’s Conservation and Liquidation Office (CLO) (http://www.caclo.org/perl/), which sells off the assets to pay policyholder claims and other creditors. The CLO operates as a fiduciary for the claimants until the assets are dispersed and the claims are paid. California also has the California Insurance Guarantee Association (CIGA) and the California Life and Health Insurance Guarantee Association (CLHIGA) to help meet the obligations of insolvent insurers through reviewing and paying claims. When a claim is either not covered by one of these organizations or it exceeds the maximum amount (except in worker’s comp cases, CIGA has a $500,000 limit), the CLO steps in with the proceeds from the asset sales.

As San Francisco insurance attorneys, we know one of the most devastating loses is one’s home. When something takes away a home, everything is upended and we need our insurance providers to come to our aide quickly so we can move on with our lives. Unfortunately, that is often when insurance companies stall and engage in unscrupulous and illegal behavior.

This week, California insurance regulators under the Department of Insurance have filed three actions against an American International Group Inc. (AIG) owned subsidiary company, New York based New Hampshire Insurance Co, over how it handled claims from that 2008 Sayre fires that devastated over 11,000 acres in the Los Angeles area in what has been dubbed the worst loss of homes due to fire in the city’s history. On that horrible November day, 600 structures were destroyed, leading the Mayor of Los Angeles and the Governor of California to declare a state of emergency. At the Oakridge Mobile Home Park alone 480 mobile homes were totally destroyed, and New Hampshire Insurance covered 370 of them with Mobile Homeowners Policies.

In the months after the Sayre fires, the Department of Insurance received numerous complaints about the insurance company’s handling of claims and investigated those complaints. The Department eventually cited New Hampshire and another subsidiary, York Risk Services Group Inc, with 125 violations of the California Insurance Code with unfair or deceptive claims practices in failing to diligently handle claims. Each of these violations, if substantiated, would have a civil penalty of $5,000 per act, raised to $10,000 if the act was willful. Department general counsel Adam M. Cole stated to reporters this week that, “We expect insurers and their agents to be thoroughly diligent in handling claims, especially at times of devastation such as the Sayre fire. The allegations in this case reflect a troubling lack of attention to consumer needs by New Hampshire Insurance Company.”

A police car crashed into a San Francisco home on March 6 when it swerved to avoid a turning car and lost control. The two police officers occupying the vehicle were taken to the hospital with minor injuries. Meanwhile, the homeowner, Margarita Gomez, was inside when the officers crashed into the garage. According to SF Gate, Mrs. Gomez heard screeching outside and was bracing for the sounds of a collision, but instead was shocked by the noise of a car slamming into her home.

Luckily, no one in the house was injured. However, Mrs. Gomez must now wait for the insurance adjuster to come out and evaluate her claim for the extensive property damage. Claimants like Mrs. Gomez should keep in mind that the adjuster works for the insurance company and not for them. The insurance company has an incentive to resolve the claim as quickly as possible, which sounds good for claimants, but claimants’ desire to receive the claim money quickly makes them susceptible to pressure to accept a relatively low offer in order to move the claim along. Other common tactics reported by Hector Quiroga, J.D. include, calling at inconvenient times to rush the claimant and also assigning multiple agents to one case so that claimants must explain their position multiple times and leaving them with possibly incongruent answers. Agents may also take the value of the claim out of context by giving examples of what the claimant can buy with the money, instead of the discussing the actual value of the claim.

If you have submitted a claim to an insurance company, NOLO recommends approach any offers with caution. If another party is at fault you will likely be dealing with that party’s insurance company In that case, you may have to argue who the other party’s liability for the damage and whether you contributed to the accident, on top of the actual dollar amount of damages. Before accepting any insurance offers over the phone, you should hang up and think over the offer and whether it really covers the damages and other hidden costs you incurred. If injuries were involved, you should roughly calculate past and future lost wages and pain and suffering. If the claim is unacceptable, but the insurance company is unyielding or using questionable tactics, you might want to consult an attorney to negotiate with the insurance company for you.
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It is not possible to turn on the TV these days without hearing endless news of the 2012 election. The presidential race has consumed most media focus, but here in California, there are other important issues that will be on the ballot in November. Among them is the 2012 Automobile Insurance Discount Act, proposed by the American Agents Alliance and supported by the billionaire chairman of Mercury Insurance George Joseph, to the tune of $8 million.

As a California insurance attorney, I see some potential issues with this Act. The changes in the so-called “persistency discount” might be helpful to some consumers. Right now, a driver generally gets a discount for having and keeping auto insurance, but if a driver switches insurance companies, that discount for maintaining insurance is lost. This Act would allow the driver to keep the discount for maintaining insurance even if he or she switches insurance companies, which supporters of this Act say is a good thing for responsible drivers.

However, the darker side to this Act is that it would also allow insurance companies to raise rates for a driver who has not kept continuous coverage. That is common in other states, but has been illegal in California since 1988. Critics say this proposal will hurt consumers who don’t own a car or use public transportation, despite being good drivers. Critics, particularly Consumer Watchdog, point to similarities in a failed ballot initiative from the 2010 election, Proposition 17. That proposed act was directly supported by Mercury Insurance and failed narrowly, 52% – 48%. One major stumbling block to Proposition 17 was that it made no provision for military personnel who are often deployed for a year or more. This 2012 Act remedies that with special provisions for the military.

The California Office of the Patient Advocate, created to inform and educate Californians on their HMOs and health insurance providers, released an annual Health Care Quality Report Card (http://www.opa.ca.gov/report_card/) this week detailing the scores for California’s nine largest health management organizations, six largest preferred provider organizations, and 212 medical groups representing 16 million consumers with private health plans. In general, it seemed California consumers were satisfied, but the report highlighted the need to improve treatment for lung disease, attention-deficit disorder, and throat infections in children. Additionally, more than a third of health insurance consumers stated they had problems with how the insurance organizations dealt with complaints.

This year’s report card also stated that the California providers exceeded the national average in terms of diabetes care and controlling high blood pressure and cholesterol, but scored lower on heart attack medications, flu shots for adults, and providing treatment for alcohol and drug abuse. Insurance consumers also complained about the difficulty getting cost estimates for medical procedures and figuring how much their insurance will pay for, as well as paying for the claims correctly.

Each plan is ranked in categories of care between one and four stars, depending on meeting national standards and membership ratings on things like getting appointments and customer service. The only HMO to receive an overall four start rating was Kaiser Permanente, but even they had troubled areas. Kaiser only received two stars for ease of making appointments and treatments, especially with specialists. And in northern California, it only received one star for plan service, which includes processing of claims. Overall, fourteen of the fifteen health plans rated scored only a one or two star rating out of four stars in customer service, which includes questions about costs and claims. Among the preferred provider organizations (PPOs), none of the six received the highest four star rating. Only three, Aetna, Cigna, and UnitedHealth were ranked as three stars, or good.

Our San Francisco insurance attorneys are always interested in developments in insurance laws around the country and in particular as they affect California. This week California Congressman John Garamendi introduced H.R. 4020 into the House of Representatives, called the Flood Insurance Farmers Act of 2012. The bill addresses the cost of insurance for farmers who grow crops and livestock on floodplains.

Many existing levees that protect agricultural land have recently been downgraded by a study of the Army Corps of Engineers and the Federal Emergency Management Agency (FEMA). Large amounts of US farmland are being designated as flood areas if the levees in those areas are not found to give 100 year protection. This would require property owners in these areas to purchase flood insurance, pay higher rates, and all new construction or improvements would have to meet stricter building requirements. In many of these areas, flood insurance is not available and farmers would not be able to improve or build new agricultural structures necessary to support or grow their business.

FEMA determined that California is the first state to have its floodplains and levees studied and mapped. Some affected California farmers are saying these restrictions on floodplains could make now productive agricultural communities disappear. The first new designations and maps released by FEMA put almost all of Sutter County in a “Special Flood Hazard Area.” Rural residents there say the level of flood insurance and certification required now is cost prohibitive and unattainable for most farmers. It could shut them down. They will be prohibited from making improvements worth more than 50 percent of the structure’s value. And anyone with a federally backed mortgage will automatically be required to purchase flood insurance, which will increase insurance costs for that property by four to six percent.

A story caught our eye this week that is the definition of shameful. Imagine our seniors, our parents and grandparents, being scammed out of benefits from long-term care insurance. Taking money from the elderly and infirm and denying them when they need the help they diligently paid for over the years. As San Francisco insurance attorneys we saw that Consumer Watchdog filed a class action lawsuit with the San Bernardino Superior Court earlier this week against the Senior Health Insurance Company of Pennsylvania (SHIP) including these allegations.

Long-term insurance claims typically involve in-home care services, mostly for caregivers that help elderly or infirm policyholders with tasks like bathing, dressing, eating, and chores around the house. The lawsuit alleges that SHIP told policyholders that in-home caregivers must be licensed, when that is not the case. SHIP also allegedly forced policyholders to produce extensive documentation and to undergo unnecessary medical exams by SHIP employed doctors. The documentation requirements were often absurd-requiring multiple forms with the same information, medical records, proof of caregiver certification, and detailed caregiver notes. The founder of Consumer Watchdog, Harvey Rosenfield, said that SHIP takes the senior’s premiums, but when a claim comes in, they inundate the policyholder with confusing correspondence, fake requirements, and endless demands for irrelevant information.

The lawsuit is on behalf of Dr. William Hall and other elderly victims of this bad faith insurance abuse. Dr. Hall is an 87 year old California resident and former US Army colonel-a wounded veteran from the Korean War. He is also the former Chief of Medicine at a California hospital. His son Eric said that Dr. Hall bought the SHIP long-term care policy to spare his family the expense of this type of care. Eric Hall says that because of SHIP the family has spent more money and more time on Dr. Hall’s care than if he had never bought the policy. Dr. Hall bought his long-term care policy in 1994 and paid premiums for sixteen years. When he needed care, SHIP delayed his benefits for eight months and then only provided him with 20 percent of the benefits to which he was entitled. Because of that, he has spent tens of thousands of dollars for caregivers, exhausting his personal resources. Dr. Hall has had to turn to his children for care, which is exactly what he was trying avoid when he purchased the insurance policy in ’94.

This week California joined six other states-Florida, Illinois, New Hampshire, North Dakota, Pennsylvania, and New Jersey-in signing a settlement with Prudential Insurance Co. of America, the country’s second largest life insurer. The settlement requires that the insurance company use enhanced researched techniques to find the beneficiaries of California life insurance policies where the dead policyholder’s benefits were never claimed. California Insurance Commissioner Dave Jones said that this is to ensure that when a life insurance holder dies, the intended beneficiaries get the owed benefits. A Prudential spokesperson asserted Prudential was not accused of any wrongdoing and that Prudential is happy to work with industry regulators on best practices and standards and is pleased to get out in front of the industry on this issue.

The agreement includes an expanded use of matching criteria when Prudential uses Social Security’s master list of deceased people (the so-called “Death Master” file) and the use of computer programs to find deaths that might have been overlooked in the past. This will help Prudential discover in a more timely fashion when a policyholder has died and ensure that policies do not go unpaid for years. If a Prudential policyholder dies, the agreement requires the company to conduct a thorough search for beneficiaries, using both their records and online search and locator tools. If no beneficiary can be located, Prudential is to turn over the proceeds from the policy to the state as required under California’s unclaimed property laws. Additionally, the settlement includes a $17 million payout by Prudential, which will be used to monitor compliance. California’s share has not been determined yet, but it is expected to exceed $1 million.

Our San Francisco insurance lawyer knows that far too many local community members have found themselves in the nightmare scenario of paying for insurance for years only to find out the benefits, for whatever reason, are not available when a disaster strikes. Often a consumer finds out he or she does not have sufficient coverage or that there is an exemption in their insurance policy for something only when the damage is already done. And insurance companies are frequently guilty of confusing business practices, i.e. hiding an exemption in tiny print or legalistic language, or outright intimidation of uninformed consumers.

Fortunately, new rules are in effect now to help California homeowner’s insurance consumers (https://www.brodfirm.com/lawyer-attorney-1844610.html) avoid these kinds of nightmarish scenarios. The California Department of Insurance has put in place the new rules to help homeowners be more informed about their policies and keep consumers from being underinsured. Insurance agents and brokers do not have to help consumers come up with a coverage figure, but under the new rules, if they do, the number must be based in reality. The brokers and agents cannot make up a number or give you a random estimate. If the broker or agent gives a homeowner a figure of how much coverage protection they need for their home, that figure must be made on a concrete calculation. In addition and in conjunction with this, the agents and brokers are required to have specific and ongoing training to teach them to do these calculations.

Some insurance brokers and agents have already been doing this voluntarily, but the insurance companies are not happy with these new rules mandating this procedure if a coverage amount is given to a consumer. Naturally, insurance companies do not want to be responsible for telling consumers what coverage is needed. The current system works to the companies’ advantage and helps their bottom line-which is to make more and more money for their coffers, not to assist consumers in times of trouble if they can avoid it. The companies are so concerned with these new rules that law suits have been filed to overturn the rules, but so far the rules are still in effect.

Recently California’s 6th Court of Appeals ruled that when a car is sold, the previous insurance is released from liability even if all of the DMV documents have not been transferred yet. Our San Francisco insurance attorneys think auto insurance consumers should be aware of this important recent ruling when buying a new car and deciding what to do about insuring a new car- the timing could be critical.

This recent case, Thiel v. Mercury General Corporation. (http://www.leagle.com/xmlResult.aspx?xmldoc=In%20CACO%2020111227042.xml&docbase=CSLWAR3-2007-CURR), turns on the specific timing and facts as to when ownership of the car was transferred and therefore when the insurance policy ceased to cover the car. Daniel Thiel bought a 2001 BMW from the Benfords in 2008. He paid for the car both with cash and a check. He was told when his check cleared the Benfords would send him the car title. However, before any paperwork could be finalized, an uninsured drunk driver struck Mr. Thiel as he was driving his new car home the very day he bought it. Mr. Thiel was not at fault for the accident and suffered head, chest and leg injuries, requiring two surgeries on his leg and physical therapy.

Mr. Thiel was also uninsured at the time, perhaps simply because had not made insurance arrangements for the car he bought just that day. Regardless, he filed a claim with Mercury Insurance, which had insured the car under the Benfords, but his claim was rejected because the Benfords filed an online Notice of Transfer and Release of Liability with the local DMV the day after the accident and therefore the coverage was terminated.