IMPORTANT
INFORMATION FOR INSURANCE COMPANIES
(Archives)
Limits on Recovery For Uninsured Not Applicable in Wrongful Death
In Horwich v. Superior Court (1998)
98 CDOS 5850, the Court of Appeal held that the statute which prevents plaintiffs in auto
accidents who drove while uninsured, were under the influence of alcohol, or were
committing a felony, from recovering damages for pain and suffering, does not apply in
wrongful death cases.
In Horwich, a woman was killed in an
accident and her parents sued the defendant for her wrongful death. The defendant
argued that the womanís parents could not recover for the loss of her care, comfort, or
society because under Civil Code section 3333.4, she had been uninsured at the time of her
accident.
It seems clear that had the woman
survived, she could not have recovered for her pain and suffering because she was
uninsured. However, the Court held that this limitation did not apply to her parents
after her death because the statute was not written to apply to parents, spouses, or
children who can sue for wrongful death.
The Court also noted in a footnote
that the statute might apply to prevent an uninsured parent from recovering for
non-economic losses arising out of the death of his child who was killed while driving the
parentís uninsured vehicle.
The Court concluded that the intent
of the statute was to prevent an uninsured person in accidents from recovering for his or
her non-economic loss and did not apply to the parents of an uninsured person who seek
recovery for their own non-economic losses.
Delbert C. Gee, August 1998
Five Year UM Arbitration Limit Retroactive
In Santangelo v. Allstate Ins. Co.
(1998) 98 CDOS 5732, the Third District Court of Appeal upheld the denial of a petition to
compel arbitration of a uninsured motorist claim for failure to complete the arbitration
within five years as required by Insurance Code section 11580.2(i)(2)(A) despite the fact
that the statute was enacted only two months before the expiration of the five year
period.
The Court held that the statute was
retroactive because the claimant did not have an unlimited time to conclude the
arbitration prior to the enactment of the statute. A delay in completing an
arbitration can constitute grounds for delay in prosecution and the delay caused by the
claimant in this case would support such a dismissal. The Court also held that the
two months the claimant had to complete the arbitration after the statute had been enacted
was a reasonable amount of time.
The Court also held that a letter
from counsel for the claimant memorializing a stipulated delay to the proceedings pending
a medical examination did not constitute a waiver of the five year period.
This case is significant because it
is one of the first appellate decisions to deal with issues involving the five year
statute of limitations for UM arbitrations under section 11580.2(i)(2)(A).
Delbert C. Gee, July 1998
Dual Coverage Under Cobra Permitted
In Geissal v. Moore Medical (98 CDOS
4303), an employee stricken with cancer was fired from his job. At that time, he was
covered under his employer-sponsored health plan and by his wife's employer-sponsored
health plan with Aetna as well. After his termination, he was initially offered
COBRA continuation coverage through his employer-sponsored heatlh plan. However,
after learning that he had coverage with Aetna, the offer of COBRA coverage was rescinded.
The U.S. Supreme Court held that the
employer-sponsored health plan could not refuse to provide continuation coverage because
under COBRA, such coverage could be terminated only when the employee became covered under
another plan. In this case, the employee already had the Aetna coverage when he was
terminated from his job.
Delbert C. Gee, July 1998
No Tort of Spoliaition
In Cedars-Sinai v. Superior Court (98
CDOS 3554), the Supreme Court held that state law did not recognize the tort of
intentional spoliation of evidence. Remedies for spoliation of evidence include
sanctions, Evidence Code inferences, and criminal penalties.
Although this case involved an
alleged removal and destruction of medical records by a hospital in a medical malpractice
case, such allegations are commonly found in insurance bad faith cases. However,
such causes of action are now no longer permitted under the law.
Delbert C. Gee, July 1998
Medical Evidence
Admissible in ERISA Action
In Kearney v. Standard Ins. Co. (1998)
98 CDOS 2958, a claimant's disability claim was denied by his insurer. The Ninth
Circuit held that under ERISA, they could decide the issue de novo because the plan
language was unclear whether the insurer had authority to construe its terms and exercise
discretion in making eligibility determinations. The plan merely called for the
claimant to submit "satisfactory written proof" of disability.
Furthermore, the insurer denied the claim when it had a conflict of interest while acting
as both insurer and administrator.
The Ninth Circuit also held that the
claimant could submit medical evidence of his disability not considered by the insurer
where the claim involved complex medical evidence, the medical evidence was relevant to
interprete the plan language, and the insurer was both the payor and administrator.
Delbert C. Gee,
April 1998
Actual Prejudice Needed for ERISA Limitations
Period
In Ward v. Management Analysis Co.
Employee Benefit Plan (1998) 98 CDOS 912, the Ninth Circuit held that an ERISA plan
must show actual prejudice before denying a claim for untimely submission.
In Ward, an employee applied
for disability benefits over two years after he had been diagnosed with his disability.
His ERISA plan denied the claim because it was filed in a timely manner as defined
under the plan. The Ninth Circuit held that ERISA was not inconsistent with
California law requiring an insurer show actual prejudice before denying a claim for an
untimely submission.
The employee also argued that he gave
notice of his claim in a timely manner when he first informed his employer of his
disability since his employer was the ERISA plan fiduciary. Consistent with
California law, the Court held that notice to the employer would be sufficient if the
employer acted as fiduciary and agent for the plan's insurer.
Delbert C. Gee,
April 1998
Loss of Use of Money Not Bad Faith
In Maxwell v. Fire Ins. Exchg.
(1998) 98 CDOS 603, the Second Appellate District held that in a case where an insurer
failed to pay a judgment in a timely fashion, the injured party could not sue for bad
faith when the only economic loss alleged was the loss of the use of the money from the
judgment. The party's credit was not damaged and his attorney's fees and costs were
contingent.
Loss of the use of money was
considered to be insufficient financial loss to allow emotional distress damages for bad
faith
It is unclear whether this financial
loss threshold applies to allow emotional distress in first and third party bad faith
cases.
Delbert C.Gee, April
1998
Reconsideration Does Not Toll Limitations Period
In Singh v. Allstate Ins. Co. (1998)
98 CDOS 2881, the Fourth Appellate District held that reconsideration of a coverage denial
does not toll the limitations period for filing suit.
In Singh, plaintiff made a
claim in April 1994 under his homeowners insurance. The claim was denied in November
1994 and the insurer informed the plaintiff that he had a year to file suit.
Plaintiff asked for reconsideration in February 1995 and the insurer responded by advising
that it was sending the request to its legal counsel. The insurer denied the request
for reconsideration in March 1995 and plaintiff filed suit.
The Court held that the limitations
period had been tolled between April and November 1994. However, the agreement to
reconsider the original denial did not toll the limitations period because the insurer did
not represent that it would reopen the file or conduct continuous negotiations. The
plaintiff had until November 1995 to file suit.
Delbert C. Gee,
April 1998
Supreme Court to Decide Joinder of PI and UM Cases
In Wooster v.
Mercury Ins. Group, 98 CDOS 1408, the California Supreme Court granted review of an
appellate court decision entitled Mercury Ins. Group v. Superior Court, 97 CDOS
9404, which had held that a claimant's personal injury action and uninsured motorist claim
could be joined for discovery and judicial arbitration. The arbitration would be
non-binding as to the personal injury action, but binding as to the uninsured motorist
claim.
By granting review, the issue of
whether a claimant's uninsured motorist claim and his or her personal injury action can be
joined in one lawsuit is now before the Supreme Court.
Delbert C. Gee,
March 1998
Delayed Payment Can Be Bad Faith
The newly decided
case entitled Pelkey v. Allstate Insurance 98 CDOS 133 reminds insurers that
plaintiffs can allege bad faith for delayed payment of benefits, as well as non-payment of
benefits. The case arises out of a dispute between two insureds and their automobile
insurer over payment of underinsured motorist benefits after an accident. There was
a dispute between the carrier and the insureds over the value of the UIM claim, but the
carrier ultimately paid its full policy limits while an arbitration was pending.
After receiving payment the insureds sued their carrier for breach of contract, bad faith,
intentional infliction of emotional distress and fraud based upon the delay in payment of
policy limits.
Allstate successfully demurred,
asserting the litigation privilege because plaintiffs' UIM claim was undergoing mandatory
arbitration during the time period encompassing the conduct about which plaintiffs
complained. The trial court granted the demurrer without leave to amend and the case
went up on appeal.
The decision of the court of appeal
is interesting because the court discusses at some length the circumstances in which
plaintiffs can allege bad faith (and/or breach of contract) when the disputed benefits
were paid before the suit was filed. In such cases the allegations always involve
delay in payment as opposed to non-payment. This decision summarizes California law
and cites the relevant prior decisions to reiterate that such a fact pattern (delay in
payment) can support a claim for bad faith and breach of contract.
The court does require that such
plaintiffs plead with clarity the "nature and extent of the compensatory
damages" arising out of the delay in payment. This focussed pleading
requirement appears to be new. One observation however; in this case the alleged
damages were largely emotional and for that reason this court holds that financial damages
must be pleaded with particularity to support such a claim. In cases where a health
carrier refuses to pre-authorize services causing a delay in the receipt of services
(alleged to be medically necessary) we believe allegations of physical pain and suffering
would provide the necessary element of consequential damages to sustain the suit (versus
financial damages). Straight reimbursement cases almost always lack actual physical
pain and suffering, hence the requirement for financial harm to support the emotional
distress claim.
In summary, we believe this case to
be a reminder that the law in California is that failure to promptly or timely pay can be
a breach of contract or bad faith, even if the disputed benefits are paid or provided
prior to filing of litigation.
Brock Phillips,
February 1998
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