When Cutting Illinois’s Medicaid Program, First, Do No Harm

May 18, 2012 |

SurgeryThe Illinois General Assembly is currently debating where to cut $2.7 billion dollars (roughly 18 percent of spending) from the state’s health insurance program for certain low-income populations. The thinking is that these “savings” will Band-Aid the hemorrhaging state budget deficit and root out fraud. If the Medicaid program were a patient, it would be on the surgery table preparing for amputation of a few healthy limbs.

And while this might prevent some problems, it is much more likely to cause larger, more serious ones. Of course we need to manage Medicaid spending so that the program is working efficiently. But cutting almost 18 percent of the program in just one year is not the way to do it.

Why should you care that these low-income folks may be cut from the Medicaid program or have severely reduced access to medical services? Because every dollar Illinois cuts means a little more than a dollar in federal funding is lost from Illinois’s economy, creating a negative ripple effect of economic harm. The proposed 18-percent cut to Medicaid would put 25,600 Illinois jobs at risk and reduce business activity by roughly $3.3 billion. 

And you should care because medical needs and costs don’t disappear when Medicaid is cut. The people who lose coverage or vital services like dental care still get sick, and then forgo or delay necessary medical care, and eventually end up in the emergency room. And by that time, they are often more expensive to treat. For those who lose coverage, manageable health conditions, such as high blood pressure and diabetes, may deteriorate and lead to hospitalizations. And a portion of these costs go unpaid and are eventually passed on to all of us--consumers, employers, and businesses--in the form of higher insurance premiums.

Rather than imposing such drastic cuts on the Medicaid program, let’s instead look at thoughtful alternatives to closing the budget gap. First, the state needs to raise revenue. The cigarette tax is an important and necessary step in that direction. Second, there are already processes in the works that promise to produce sustainable savings and improve care in the Medicaid program. For instance, let’s allow the state’s new Medicaid reform plan, which includes increased care innovation for high-cost enrollees, to take effect. And new care coordination entities, such as the Medical Home Network, show great promise for increased efficiencies for Medicaid enrollees.

Let’s remember that quick fixes sound good but often have long-term negative impacts. And like an amputation, they can be both irreversible and regrettable.

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Can a Prior Owner Sue Carrier for Bad Faith and Breach of Contract?

May 18, 2012 |

With the number of properties being transferred and sold in today's real estate economy, many buyers and sellers face new challenges regarding property damage and bad faith claims against insurance companies. This week, I write about a case that addresses whether a prior owner can assert both breach of contract and bad faith claims against a carrier after selling the property at issue.

On March 25, 2005, Mr. and Mrs. Martin entered into a contract to purchase a home from Mr. and Mrs. Matusiak. In connection with the sale of the home, the property was inspected and there was no hail damage to the roof. A few weeks later, a hailstorm damaged the house's roof, but neither the Martins nor the Matusiaks were aware of the damage. The sale of the home closed on May 17, 2005.

In September of 2005, the Martins learned that their roof had sustained hail damage so they contacted the Matusiaks. The Matusiaks filed a claim with American Family Mutual Insurance Company and the Martins received two estimates for the repair of the roof, one for $7,834 and the other for $8,643. American Family denied the Matusiaks' claim on grounds that they did not suffer a loss, so the Matusiaks sued American Family for breach of contract and bad faith. The trial court ruled in favor of the Matusiaks and ordered to American Family pay them $8,643.

American Family appealed the lower court's award of damages to the Matusiaks, claiming that because the Matusiaks sold their house to the Martins for the agreed-upon price in the purchase contract, despite the intervening hail damage, the Matusiaks bore none of the costs of that damage and did not suffer a loss. The Appellate Court did not agree with American Family.

American Family's policy provided the Matusiaks with two types of coverage:

Procedures to Claim Replacement Coverage.

If you receive an actual cash value settlement for damaged or stolen property covered by replacement coverage and you have not reached your limit, you may make a further claim under this condition for any additional payment on a replacement cost basis provided:

(1) you notify us within 180 days after the loss of your decision to repair or replace the damaged or stolen property; and

(2) repair or replacement is completed within one year of the date of loss.

The Court explained that this provision means that the Matusiaks cannot seek replacement coverage unless they first receive payment for the actual cash value of the loss, which did not happen because American Family denied the claim. The question, then, is whether the Matusiaks were entitled to a cash value settlement that they did not receive, which would require them to establish that they suffered a “loss” under the terms of the insurance contract and in the context of cash value coverage.

The Matusiaks had evidence that they suffered a loss because they pledged to pay to repair the roof and agreed to give any insurance proceeds to the Martins. By making the foregoing pledges, the Matusiaks established a cash value loss and, therefore, American Family breached its insurance contract when denying their claim.

The lower court denied the Matusiaks’ motion for summary judgment as to bad faith. The appellate court sent the bad faith issues back to the trial court for an evaluation and ruling on bad faith subsequent to the finding that American Family breached the contract.

It is important to consider that when a property is sold, the rights to the proceeds of any pending insurance claims or for insurance claims for losses occurring before the date of purchase may create an issue if that insurance claim is pursued. It is important to buyers to inspect property before closing and to review the contract for sale regarding the rights to any insurance claims. In this case, the language of the insurance policy at issue played a key role in determining whether the prior owner had any rights.

It is also important for policyholders and their attorneys to carefully evaluate the language in the policy at issue, the law in the particular jurisdiction where the property is located, and sometimes, the documents for the purchase of a property.

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Social Security Death Master File – What Do MetLife, Prudential, and other insurance companies do with it?

May 18, 2012 |

The Social Security Death Master File is an ominous name for a benign computer database maintained by the Social Security Administration (SSA). The Death Master File is simply a list of the names of people whose deaths have been reported to the SSA. What is less benign, however, is what insurance companies like MetLife and Prudential have been doing with the Death Master File.

These insurers regularly check the list to look for names of beneficiaries and when they find them, they stop paying for the annuities that were funding the life insurance benefits being paid. What these companies do not do is check the list for names of policyholders in order to notify beneficiaries that they may make a claim. The problem is that very often, unless the policyholder has informed a beneficiary that he has been listed as a beneficiary in the policyholder’s life insurance policy, that beneficiary would have no way of knowing that he was named, or that he could make a claim upon the policyholder’s death. In other words, insurance companies are acting with only their bottom line – and not their policyholders’ best interests - in mind.

While there have been lawsuits filed against MetLife and Prudential for this conduct, and a settlement has been reached, there really is no protection for consumers to prevent this practice from happening in the future.

In order to best protect yourself and your beneficiary(ies) with regard to the life insurance benefits for which you or your employer have been paying premiums is to ensure that you do the following:

(1) Inform your beneficiary(ies) that you have named him/her(them) in your life insurance policy as the beneficiary(ies).
(2) Keep a copy of your life insurance policy and the instructions for making a claim in a safe place.
(3) Tell your beneficiary(ies) where your policy is kept and make sure they will have unrestricted access to it.

Believe it or not, insurance companies often find reasons to deny life insurance claims! If you or anyone you know is ever in that position, we can help.

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Action Against Workers’ Comp Claims Administrator Not Covered by Insurer’s Arbitration Provision, Court of Appeal Rules

May 18, 2012 |

by Gail E. Cohen

In DMS Services, Inc. v. Superior Court, the Plaintiff brought suit in California state court for breach of contract, bad faith and related claims against the third-party administrator, or TPA, responsible for managing its workers’ compensation claims. It also sued its workers’ compensation insurer, Zurich Insurance, for declaratory relief contending that the insurer’s high deductible insurance agreement (also known in the industry as a payment agreement) containing an arbitration clause was invalid under California Insurance Code section 11658 since it was not approved by the Department of Insurance.

In a pattern not uncommon in these cases, Plaintiff’s lawsuit came on the heels of the insurer’s demand and pursuit of arbitration for monies owed by the insured for insurance claim deductibles and unpaid losses.

In response, the insurer and TPA filed a joint petition to compel arbitration of all of the state court claims under the arbitration clause contained in the insurer’s high-deductible agreement, or, in the alternative, to stay the action pending the outcome of the arbitration between the insured and insurer. DMS, in turn, filed a separate motion to stay the arbitration arguing that there was the “possibility of conflicting rulings on common issues of law and fact.” The trial court granted the petition, rejected the Plaintiff’s request for a stay, and Plaintiff appealed.

The California Court of Appeal, Second Appellate District, reversed, holding that the claims against the TPA were not subject to arbitration and that, as a consequence, it need not address the merits of the Plaintiff’s contentions concerning the invalidity of the deductible agreement.

In reversing the ruling as to the arbitrability of the claims against the TPA, the court of appeal emphasized that the TPA was not a signatory to the deductible agreement containing the arbitration clause and further highlighted the fact that there was a separate claims service agreement between the TPA and the insured which did not contain an arbitration provision. It also reasoned that the insured’s claims against the TPA for breach of its administration agreement were not “founded in” and “inextricably intertwined” with the insurance policies, the test for binding a nonsignatory to an arbitration agreement under the equitable estoppel doctrine. E.g., Molecular Analytical Systems v. Cipergen Biosystems, Inc., 186 Cal. App. 4th 696, 708 (2010), cited with approval.

Note: A pivotal factor underlying the court of appeal’s conclusion was its finding that the TPA, though affiliated with the insurer Zurich, was not, nor alleged to be, an agent of the insurer. In so ruling, the court factually distinguished the federal district court’s decision in NS Holdings LLC Inc. v. American International Group Inc. According to the DMS court, in NS Holdings, the TPA at issue (also a company related to the insurer) entered into a claims services agreement with the insurer, and thus was its agent and covered by the insurer’s arbitration agreement with its insured, even if it was not a signatory to that agreement.

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The Foul Smell of the Absolute Pollution Exclusion

May 18, 2012 |

Policyholders in Colorado beware, Colorado’s Appeals Court recently determined that sewage is a pollutant, and that the Absolute Pollution Exclusion, found in many property and liability policies, unambiguously excludes property damages and injuries arising from sewage.

In Figuli v. State Farm Fire & Cas., No. 11CA0613, 2012 WL 1036064 (Colo. App. March 29, 2012), the Figuli plaintiffs became ill while living in a rental property owned by Plaintiff Chu. The property was covered by a rental dwelling policy, as well as a personal liability umbrella policy with State Farm. Testing revealed the presence of raw sewage at the property. Figulis filed suit against landlord Chu. Chu then requested that State Farm defend and indemnify her for the property damage and injuries arising from the sewage. State Farm denied coverage based primarily on the policy Absolute Pollution Exclusion (“APE”).

The APE in this policy stated:

1. Coverage L—Business Liability and Coverage M—Premises Medical Payments do not apply to:
i. bodily injury or property damages arising out of the actual, alleged or threatened discharge, dispersal, spill, release or escape of pollutants:
(1) at or from premises owned, rented or occupied by the named insured;
....
As used in this exclusion:
“pollutants” means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.
“waste” includes materials to be recycled, reconditioned or reclaimed.

State Farm determined the Figulis' claimed injuries from “raw sewage and/or other hazardous materials” were damages arising from the “discharge, dispersal, spill, release or escape of pollutants” and not covered by the policy.

The lower court, relying on dictionary definitions and federal and state laws regarding water quality, determined that raw sewage is unambiguously a pollutant. Plaintiffs appealed only the issue of contract interpretation as to whether:

[W]ater and sewage, which overflowed from a residential toilet or sewer, and the bacteria and parasites that it carried, [are] “pollutants” for the purposes of Ms. Chu's insurance coverage, and the standard pollution exclusion, contained in her policies.

Plaintiffs argued that the common understanding of “pollutant” is an environmental or industrial pollutant, not sewage from a residential toilet. The Colorado Court of Appeals rejected decisions from the 6th Circuit and Illinois, and confirmed pollutants are not limited to environmental or industrial contexts, and sewage from a residential toilet is a pollutant as defined in the policy’s APE.

The decision is noteworthy because many policyholders may not think of sewage from a residential toilet or plumbing system as a pollutant. In some instances, the “generally accepted meaning of words” may be different from dictionary definitions. The exclusion in Figuli was contained in the policy liability section, not the property section. Homeowners and business property owners should review their own policies because the pollution exclusion or definitions in their own policies may be different from that at issue in Figuli.

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Raising Awareness About the Importance of Disability Insurance

May 17, 2012 |


In honor of Lupus Awareness Month and MS Awareness Day on May 30, 2012, we want to raise awareness about an issue most people don’t often think about until they get sick and can’t work: disability insurance. A recent Chicago Sun-Times article pointed out that between the ages of 25 and 65, people are four times more likely to become disabled than to die. Many people who become disabled by disease may be unable to work because of symptoms from the disease or side-effects from the treatment. In that case, disability insurance will pay the bills. Financial reporter Terry Savage suggests that employees invest in individual disability coverage over and above what employers may provide. See, “Disability Insurance More Crucial Than You May Think.”

When many think of disability, the image of someone in a wheelchair comes to mind. The irony of that is, with accommodation, many people in wheelchairs are able to work long and productive lives. This may not be so for some people with Lupus or Multiple Sclerosis, as well as Fibromyalgia, Chronic Fatigue, Crohn’s Disease, Parkinson’s disease, HIV/AIDS and even cancer. These diseases are often called invisible disabilities because the sufferer may not look disabled even when he or she is unable to work. And many of those have a hard job convincing their disability insurer they need the benefits they paid for.

Savage stresses there are other reasons why disability insurance isn’t perfect. It will never pay your full salary, and if you are in an extremely high income bracket, it may cap out at $10,000 a month. Still, Savage says, nothing else compares to “paycheck insurance” if you become too ill to work.

We agree, and few things are more rewarding to us than helping people recover their disability benefits after they have been denied. If that has happened to you, call us at (800) 446-7529. We can help.

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Pitfalls to Avoid After a Loss

May 17, 2012 |

Recently, there was an article in the USA Today titled, “States fight back on shady 'storm chaser' contractors.” The article pointed out the concerns that some states have with dishonest contractors approaching homeowners a day or two after a major disaster has struck the area. The article stated,

In the aftermath of a violent storm, homeowners anxious to get repair work underway can be vulnerable to aggressive contractors who known on their doors offering quick, costly deals. . . .

The article seems to have a slanted view of contractors who approach homeowners after a major disaster, but concedes “[n]ot all contractors who arrive quickly on the scene after a storm are dishonest.”

Slant or not, the article raises an important point – when faced with a loss to your home or building, you likely do not want to sign a contract with a contractor without first speaking to your insurance company. For those who are unfamiliar with the insurance claims process, or for those too overwhelmed by the situation in general, hiring a public adjuster can prove extremely helpful as they know how insurance companies work and can ensure that your rights under the insurance contract are protected.

If you are compelled to enter into a contract quickly, be sure to use due diligence in determining whether the contractor is legitimate. Contractors who promise to negotiate directly with your insurance company or who claim they will be paid by your insurance company are probably best avoided. Check for proper licenses from your state and, of course, avoid paying with cash – at least until the job is completed. Not only does this help avoid scamming contractors, it also will assist down the road when dealing with your insurance company. Your insurer will likely request documentation that you actually paid for the work performed to your house. If you paid with a check or credit card, you can easily find that documentation. If you paid with cash, the documentation may be more difficult to come by.

All in all, use common sense and, while it is easier said than done, try your best to make sound decisions even in the face of disaster. Emotional decisions are rarely good ones. If you are like most homeowners when their home is damaged, you may have a particularly difficult time keeping emotion out of it. This, as mentioned before, is when a public adjuster may be worth their weight in gold. They can handle many of the issues you have and help you make sound unemotional decisions so that you can get your home back as quickly as possible.

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Northrop Grumman Employee Sues Unum For Violation of ERISA Rights and Reinstatement of Disability Benefits

May 16, 2012 |

 In Hoang N VS Unum Life Insurance Company of America and Northrop Grumman Long Term Disability Plan, Plaintiff wants reinstatement of long term disability payments that were originally paid, then terminated, by Unum.

The Plaintiff, with the help of his California Disability Attorney, has filed this lawsuit in the United States District Court Central District of California against Unum.

Plaintiff's History and Reasons For Filing a Claim

Plaintiff worked as a systems administrator and network engineer at Northrop Grumman. His employment entitled him to be a participant in the Long Term Disability plan and other employee benefit plans that were established and maintained by Northrop Grumman.

Plaintiff suffered serious injury to his cervical spine when a heavy metal door fell on his head at work and knocked him to the ground unconscious. This accident caused the Plaintiff to become disabled as defined under the terms of the LTD Plan. Plaintiff filed a claim with the Defendants for LTD benefits under terms of the Plan. The Defendants originally approved the claim for LTD benefits.

Unum and Northrop Grumman Improperly Terminate Long Term Disability Benefits

On or about November 4, 2008, Defendants abruptly terminate the LTD benefits received by the Plaintiff. From the period of November 2008 through June 2009. Plaintiff's doctor reports that the Plaintiff was suffering from the following conditions:

  • Dysphoric mood
  • Excessive worrying
  • Insomnia
  • Confusion
  • Irritability
  • Lack of appetite
  • Intermittent suicidal ideation
  • Social isolation
  • Paranoia

Plaintiff filed an appeal of Defendants' denial on June 12, 2009. Unum replied to Plaintiff on June 15, 2009 that they could not review Plaintiff's claim because the appeal came after the 180-day deadline, meaning that the original decision on the claim must stand.

After Plaintiff received a Social Security Administration decision in his favor, Plaintiff again requested that Defendants reinstate his long term disability benefits on April 25, 2011. Once again, on May 2, 2011, Defendants deny Plaintiff's request. (Can the disability insurance company still deny you even if the Social Security Administration has awarded disability benefits?)

Due to the fact that Plaintiff has exhausted all administrative remedies required under ERISA, Plaintiff has filed this lawsuit against Unum and Northrop Grumman.

Basis for Plaintiff's Lawsuit

Plaintiff claims that Defendants failed to allow Plaintiff to file an administrative appeal against California's notice-prejudice rule, which only prevents a person from filing an administrative appeal after a deadline if the Defendants are actually and substantially prejudiced by the delay. Plaintiff also claims that Defendants prevented Plaintiff from filing an administrative appeal when Defendants knew that the Plaintiff was suffering from severe cognitive problems.

Plaintiff also claims that Defendants did not provide any reasonable explanation of why Plaintiff's appeal was not considered, nor why his original claim was denied. Defendants also did not provide any explanation of what materials could have been added to increase the chances of a successful claim.

Plaintiff also claims that Defendants failed to adequately inform the Plaintiff of notice requirements under ERISA. Additionally, Defendants failed to properly investigate the merits of the Plaintiff's claim.

Type of Relief Requested from the Court

Plaintiff requests that the Court grant the following relief:

  • Plaintiff is able to file an administrative appeal of the denial of his original claim
  • The administrative appeal will be given full and fair consideration
  • All associated costs are paid
  • All appropriate attorney fees are paid
  • All other relief decided upon by the Court is fulfilled

About the author: Gregory Michael Dell is an attorney and managing partner of the disability income division of Attorneys Dell & Schaefer. Mr. Dell and his team of lawyers have assisted thousands of long-term disability claimants with their claims against every major disability insurance company. Request a free legal consultation here or call 800-698-9162.

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Frustrated by the Long Term Care Insurance Claim Process?

May 16, 2012 |

It is no secret that the claims process of a long term care claim is frequently frustrating and confusing. Many of the insurers who originally sold the policies are no longer in business or have discontinued writing new business. In our opinion, this affects the claim process.

Clients frequently come to us with the same complaints: The carriers have lost their claim submission on multiple occasions, they repetitively request more information on a piecemeal basis, and/or the claim denial does not give an adequate explanation of the reasons for the claim denial. The following are some tips for submitting a claim which will also assist you and your attorneys if you ultimately file suit over a claim denial:

1. All communications should be in writing and keep a copy of all documents you receive or send to the insurer. If you do speak to a claim representative on the phone, obtain their name. Keep a journal of all oral communications so that you can accurately re-create what has occurred in connection with the claim.

2. Carefully review all claim paperwork before it is submitted. A LTD claim requires a physician to specify a “plan of care.” Usually, there is an area on the attending physician statement form where the “plan of care” is to be specified. The plan of care should detail what type of care is required and for what period of time, i.e., “home health aide, 7 days a week, 12 hours a day.”
3. If you are seeking benefits for care rendered in a facility, i.e., a nursing home or an assisted living facility, check the facility’s license before you submit the claim. Many older policies will not pay benefits for an assisted living facility. In addition, if the policy requires that a nurse “supervise” the facility, ensure that the facility you have chosen meets those requirements.

4. If you are told that the Policy has lapsed for non payment of premiums, consult with an attorney immediately. Most policies have protections against an unintended lapse. However, there may be a time limit on obtaining a reinstatement.

We have helped many, many clients recover the long term care benefits to which they are entitled. In our experience, meritorious claims have been denied as a result of careless claims handling. We are experienced in identifying where the claim adjuster mis-handled the claim and can assist you or your loved one in recovering benefits.

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Child Care Cuts Would Batter Working Families

May 16, 2012 |

Child CareThis post was coauthored by Sessy Nyman, vice president for policy and strategic partnerships at Illinois Action for Children. 

There is no other way to describe it — the state budget proposals in Springfield are a disaster for working families and their children.

More than $85 million in truly frightening cuts to the Child Care Assistance Program are proposed in this budget. The CCAP helps low-income parents who need child care to work or go to school. Parents share in the cost of care by making a co-payment based on the family’s income and size, with the state paying the balance based on a provider reimbursement schedule.

These cuts include an on-average 52-percent increase in a parents’ co-payment, a significant reduction in eligibility to qualify for the program — from 185 percent of the federal poverty level to 150 percent to enter, and the elimination of a scheduled rate increase to center-based providers. This will send thousands of families out of the CCAP and force countless providers to close their doors.

In the long term, less access to child care is also likely to produce a myriad of social problems that result when young children do not get the nurturing care they need.

To make matters worse, these cuts will start a domino effect that ultimately puts low-income families with children at risk of losing valuable early childhood education opportunities.

Many families that are enrolled in the state’s Preschool for All program also receive child-care assistance or participate in Head Start programs. They rely upon child-care assistance to access care for their children before and after their child’s half-day of preschool.

Where will a family send their child after each half-day of preschool if they are no longer eligible for child-care assistance, cannot afford the massive increase in their child-care co-payment, or cannot find child care since so many providers have been forced out of business by budget cuts and late payments from the state?

If child care is cut, there will not be another option for the families that depend on it. If education is cut, we cannot expect our schools to improve. Illinois will clearly violate its constitutional responsibilities to provide for the safety and welfare of its people both now and in the future if these cuts are enacted.

Research, including that of Nobel Prize-winning economist James Heckman, shows that every dollar spent on early childhood development, including the years spent in a child-care setting, yields at least eight dollars in return. Indeed, one study after another has concluded that investing in quality early childhood education and care produces a higher rate of return than any other public investment. Illinois willingly refuses that return on investment and the economic impact it brings if it severs the links in the chain of early childhood development.

Moreover, investing in child care creates jobs and stimulates the economy. Every dollar we spend on child-care assistance makes it possible for a single mother to work, creates a job for a caregiver, and enhances the early childhood experience of a child. It also pumps dollars into local communities.

Parents need full-day child-care options in order to participate in the state’s Preschool for All programs that promote this early child development. Illinois’s early childhood system has been designed to provide our highest-risk children with the school readiness opportunities children need, and the full-day child-care options families need to work and contribute to the economy.

Preschool for All, Head Start, and child care work hand in hand to support families today and prepare children for the brightest tomorrow possible.

We live in a society that places a very high value on work and believes that every parent should support their children through work. As a society, we rightfully expect parents to put their children first, even when times are tough. It is time that we, as residents of this state, demand the same from our elected leaders — put our children first, especially when times are tough.



 

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