Melissa Anderson v. Thomas Aul, 2015WI 19 25 (February 25, 2015)

 In a significant decision the Wisconsin Supreme Court has held that claims-made-and-reported requirements in claims made policies should be enforced as written. An insured's failure to report a claim during the time required by the policy will operate as a bar to coverage. See Anderson v. Aul, 2015 WI 19. The Court reversed the Court of Appeals decision holding that Wisconsin's notice-prejudice statute superseded the claims-made-and-reported requirement of the professional liability policy. The Court also observed that even if the notice-prejudice statutes applied, requiring an insurer to provide coverage for a claim reported after the end of a claims-made-and-reported policy period was per se prejudicial to the insurance company. The decision places Wisconsin in the majority of jurisdictions that have enforced claims-made-and-reported policies as written.

The facts in the case were undisputed. On December 23, 2009 the Andersons notified Attorney Aul by letter that they were dissatisfied with the legal representation he had provided and demanded that Attorney Aul pay them $117,000.00. Aul received the letter while he was insured under a claims-made-and-reported professional liability policy. It was undisputed that the letter was a claim first made during the policy period and that the policy required Aul to report the claim during the same period. However, Aul did not report the claim until nearly a year after the policy expired.

A year later suit ensued and the professional liability insurer moved to intervene and sought a declaration that the insurance policy it had issued to Aul did not provide coverage because the claim was not reported as required during the policy period. The circuit court agreed with the insurer and granted its motion for summary judgment.

The Court of Appeals reversed the trial court's decision, finding that Wisconsin's notice-prejudice statutes, Wis. Stat. 631.81(1) and § 632.26, applied to the reporting requirement of the claims-made-and reported policy. These two statutes have been interpreted in tandem to hold that an insurer whose insured provides late notice within one year of the time required by the policy must show that it was prejudiced by the late notice in order to decline coverage. When notice is given more than one year after the time required by the policy, there is a rebuttable presumption of prejudice and the burden of proof shifts to the claimant to prove that the insurer was not prejudiced by the untimely notice. See Neff v. Pierzina, 2001 WI 95 ¶ 43, 245 Wis. 2d 285, 629 N.W.2d 177. The court stated that both the applicable statutes and Wisconsin's case law made it clear that in order to decline coverage based on the late notice, the insurer must show it was prejudiced by the late notice. The court then applied the definition of "prejudice" adopted in prior cases and concluded that because Aul's untimely reporting of the claim did not hinder the insurer's ability to investigate, evaluate or settle the claim; determine coverage or present an effective defense, the insurer had not been prejudiced and therefore the policy provided coverage.

The Supreme Court reversed and enforced the claims-made-and-reported requirement of the policy as written, holding that the notice-prejudice statutes did not supersede the plain language of a claims-made-and reported policy. Wisconsin therefore joined the vast majority of jurisdictions which have strictly enforced the requirement that notice be provided during the described period without regard to whether or not the insurer was prejudiced by the delay. 

Sony and Its Insurers Wrangle over Coverage for Data Breach

A coverage dispute winding its way through New York appellate courts could provide useful guidance about the scope of “personal and advertising injury” coverage in standard commercial general liability policies.

According to a Law360 report, Sony Corp.’s lawyers recently asked a New York appeals court to overturn a trial court’s ruling that a data breach did not involve the “publication” of private information within the meaning of Sony’s commercial general liability policy.

The dispute, entitled Zurich American Insurance Co. v. Sony Corp. of America et al., stems from a 2011 cyberattack in which computer hackers broke into Sony networks and stole personal information of over 100 million users.  A key legal issue is whether Sony’s negligent failure to prevent the data breach constituted a “publication.”  The trial court ruled that coverage for a “publication, in any manner, of material that violates a person’s right of privacy” applied only to Sony’s own publications, not to those committed by third-party hackers.

During oral arguments before the appellate panel, Sony stressed that the right of privacy provision covers publications “in any manner” and that the policy language does not expressly limit coverage to liability from the insured’s own publications. In response, the insurers maintained that the “in any manner” language refers to the medium for the publication, not the entity that made it.  The insurers contended that the “publication” requirement should be construed in the context of the policy’s other offense-based coverages – such as malicious prosecution, wrongful eviction, and false arrest – which contemplate purposeful conduct by the insured.

The insurers’ briefing relied on the New York Court of Appeals decision in Columbia v. Continental Ins. Co., 83 N.Y.2d 618, 634 N.E.2d 946 (1994).  There, Columbia County sought coverage for environmental contamination under a personal injury endorsement.  Personal injury was defined to include "wrongful entry or eviction or other invasion of the right of private occupancy.”  The policy’s pollution exclusion barred coverage under an occurrence-based property damage theory.  Upholding a dismissal in the insurer’s favor, the Court of Appeals interpreted personal injury coverage to reach only the insured’s “purposeful acts” not indirect, incremental harm from environmental pollution.  Under this reasoning, the right of privacy prong would cover only an insured’s affirmative publications not its negligent failure to prevent a data breach.

The resolution of the Sony coverage litigation will have little impact on coverage for data breaches under most commercial general liability policies.  Insurers have significantly expanded the exclusions in traditional liability policies to preclude coverage for almost all cyber-related risks.  As a result, insureds will have to purchase specialty cyber policies to obtain protection for data breaches.

Nonetheless, the final decision in the Zurich v. Sony litigation should address significant issues bearing on the interpretation of “personal and advertising injury” coverage in standard liability policies – namely, the “publication” requirement and whether the “personal injury” offenses cover only the insured’s purposeful conduct.   

Watch out for ambiguous, or even deceptive language in communications regarding employee benefits!

A common problem we see in correspondence from insurance companies to insureds is ambiguous and misleading language. A new life insurance matter we are handling provides a perfect example:

In this case, a woman who had just been diagnosed with terminal cancer, left work and applied for and was granted disability entitlements. She was subsequently repeatedly encouraged by her former employer to sign a form in order to receive her hard-earned pension of $80,000 in a lump sum. Unbeknownst to her, when she took her pension money it allegedly triggered an early retirement which had the unintended effect of reducing her life insurance benefit from $700,000 to $77,000. Upon her passing, her son found out for the first time that by taking the pension money his mother had, according to the insurer, “elected to retire,” and that he would only get 10% of what he thought he was going to receive.

The forms she signed never used the word “retirement” or “retiree,” instead opting to use words like “separation from service” or “former associate.” To make matters worse, the insurance company sent letters for several months after her alleged retirement, indicating the life insurance benefit was still the higher amount. The insurer claimed those letters were sent in error because they did not know about the pension payout/early retirement. That argument might make sense…except for the fact that the insurance company’s name is on the deposit slip for the pension payout, and the employer who processed the payout owns the insurance company!!!

We're still in the early stages of this dispute, but we hope to correct the error on behalf of our client.

So please, before you sign anything related to insurance or employee benefits, read it VERY carefully. And if you have any questions about what effect it might have, call Kantor & Kantor for a free consultation at 800-569-6013.

What is “Binding Arbitration”?

From time-to-time we review a health insurance policy for a client who has been denied medical treatment, services, or benefits and we find that their policy contains a binding arbitration provision. Oftentimes our clients are surprised to hear this and need help understanding what this means for them and their case.

Arbitration is an out-of-court proceeding in which a neutral third party, called an arbitrator, hears evidence and then makes a binding decision. Arbitration is the most commonly used method of Alternative Dispute Resolution. Indeed, if you look closely enough, you may find an arbitration clause in the fine print of all kinds of contracts these days.

As an alternative to judges or courts settling disputes between consumers and businesses, binding arbitration works out a deal through an independent, third-party – the arbitrator. Binding arbitration may save time, money, and energy when two parties disagree over a contract, the performance of a service, or the exchange of goods. The arbitrator's decision is final and cannot be disputed or appealed.

A binding arbitration hearing is set up much like a court hearing: all parties may choose whether or not to hire an attorney and each party is given time to present evidence and call on witnesses. After hearing from everyone involved, the arbitrator makes a final and binding decision; while this decision is legal and usually immediately enforced, it cannot be disputed to the arbitrator or challenged in court, except under extraordinary circumstances.

Some of the controversy surrounding binding arbitration revolves around people's rights with respect to mandatory versus voluntary arbitration. With mandatory arbitration, a borrower or consumer must agree to use an arbitrator, rather than the courts, to resolve any issues. In voluntary arbitration, after a disagreement arises, both the consumer and the company can agree that they find it mutually beneficial to let a third party intervene.

Consumers waive their constitutional rights to sue as an individual or with a class action suit when they sign a mandatory binding arbitration clause as part of a contract. Often, people do not even realize that by signing a binding arbitration clause, they have denied themselves certain valuable rights. And, more often than not, consumers don't even have a choice, if they want the services they are contracting for.

If your health insurance claim has been denied, and you have questions about binding arbitration, or any questions about your legal rights, please do not hesitate to contact our office for a no-cost consultation.

We understand, and we can help. (800) 446-7529

Unum abused its discretion by disregarding results of a functional capacity evaluation (FCE) of a disabled registered nurse

Can a Functional Capacity Evaluation be Useful to determine if a Claimant with Fibromyalgia is disabled?

It is very common for an insurance company to deny disability benefits to individuals suffering from Fibromyalgia. This happens more often than not due to the inability to provide the insurance company with objective proof of the disability, as none exists. There are no known objective tests for fibromyalgia at this point in time.

The diagnosis is made solely by the subjective complaints of the patient and by ruling out all other possibilities. Claimants become frustrated with their disability insurance carriers when they ask to provide objective proof of their condition, but none can be provided. However, a functional capacity evaluation (FCE) can be performed on claimants with fibromyalgia to help provide objective proof that they are suffering from pain and fatigue and unable to perform their occupation or any gainful occupation. If an FCE shows that the claimant is disabled and unable to work, the insurance company must take this into consideration.

In the case of Warner v. Unum Life Ins. Co., a Court in the Northern District of Illinois ruled that Unum acted arbitrarily and capriciously by completely disregarding the results of an FCE that limited the Plaintiff, an R.N. to sedentary work capacity. Unum ignored the FCE results and relied on its physician’s opinion that merely performed a paper review of her records and stated that she was not disabled. Unum claimed that the reason it would not consider the FCE report was that “the FCE recorded functional limitations caused by impairments that could not be seen or measured with objective medical tests… even though the resulting limitations were documented.” The Court disagreed with Unum’s decision, noting that in the Seventh Circuit, precedent “forbids the denial of benefits based on this sole ground if indeed there are no applicable objective tests to perform.”

Since Unum failed to consider the FCE, the Court in Warner entered judgment for the Plaintiff, awarding past due benefits to her and remanding her claim back to Unum to determine if she was able to work in any gainful occupation (as this had never been considered).

If you are suffering from Fibromyalgia and have been denied disability benefits by your insurance carrier, or think you may be, it may be beneficial to undergo an FCE with the proper specialist. The results of the FCE may help demonstrate that you are unable to perform the duties of your occupation or any gainful occupation. To determine whether this may be appropriate for your claim, please contact the law firm of Dell & Schaefer and ask to consult with one of our disability attorneys.

Lyme Disease Disables Client – Long Term Disability Insurance Denial Overturned!

Our client, a 32 year old, highly successful professional, was diagnosed with Lyme disease, as well as chronic fatigue syndrome, Epstein Barr virus, Barbonella and babesia. As a result of her disease, she suffered from cognitive impairment, chronic pain and extreme fatigue. In late 2013, she could no longer endure the rigors of her occupation. She submitted a claim for long term disability to her insurer, Prudential Insurance Company of America (Prudential).

Lyme disease, in particular, can be a severely debilitating illness. It can affect any organ of the body, including the brain and nervous system, muscles, joints, and the heart. If detected early, lyme disease is highly treatable and curable, however the symptoms, such as a fever, chills, sweats, muscle aches, fatigue, nausea and joint pain often make it difficult for a patient to detect and it is regularly mistaken as a flu. Less than 10% of people have a “classic bullseye” rash and often the rash appears and fades and then reappears later. Its symptoms mimic other diseases so much so that Lyme disease is called “The Great Imitator.”

If Lyme disease is not diagnosed and treated early, the Lyme spirochetes can spread and may go into hiding in your body. Weeks, months or even years later, symptoms may appear including headaches, light and sound sensitivity, cognitive impairment, sleep disturbance, depression, anxiety, arthritis, fatigue, abdominal pain, diarrhea, chest palpitations, shortness of breath, burning or shooting pains and reproductive system complications.

Early in 2014, Prudential denied our client's claim for long term disability benefits concluding that she was not disabled from her regular occupation. On her behalf, Kantor & Kantor appealed this decision. We submitted a comprehensive written appeal accompanied by medical records, medical opinions, and Lyme disease research and statistics. Just recently, Prudential overturned the denial, and benefits were reinstated.

This case was yet another example of an insurance company not taking the time to consider the medical records submitted by their insured, understand the nature of the illness, or comprehend the complications associated with the illness and the impact it has on a person’s life.

We are thrilled that this denial was rightly overturned and that the intervention of the court system was not required.

If you or someone close to you is suffering from Lyme disease, or any other illness, and your are being denied benefits by your insurer, please call Kantor & Kantor for a free consultation at 888-569-6013. We can help!

Auto insurance rates explained..well sort of!

New drivers, young drivers, older drivers? Why do auto rates start high and eventually end just as high? I call it the "Insurance inverted bell curve" . When you are a young or a new/inexperienced driver, rates are high . As you gain experience, build a quality driving record, credit, and ability to pay, the rates slowly but surely decline until you are paying the best rates EVER in your late 30's thru early 60's. YET WAIT FOR your age increases past age 60, rates will slowly again increase. The " surprise" increase is based on long-term data collected about drivers. It is shown as drivers get older, the reflexes slow a bit, eyesight may not be what it once was...yet the confidence in your ability remains at an all time high. Eventually this leads to accidents and hence higher rates. Like any demographic, there is clear exceptions to this rule, but as a whole, this is the thought process in for thought.

Current Carriers and options with Eagle Harbor !!!

Kemper, Hartford, AARP, Progressive, Foremost, Philadelphia, Guide One, Zurich, National General, Fireman's Fund, Markel, Red Shield, Premier, Ace, Chubb, CBIC, Navigators, One Beacon, Gotham, Arch.... and more! We have a carriers to meet EVERYONES needs! Home, Auto, Boat, Motorcycle, Commercial, Event, Bonds, E/O coverage, D/O Coverage ,Health Life, Disability, LTC.. we can do it all. Call us (206) 842 7410

Texas Supreme Court Issues Long Awaited Opinion on Additional Insured Coverage

This post was written by John Shugrue, Jennifer Dotson and Kevin Dreher.

On February 13, 2015, the Texas Supreme Court, in response to certified questions from the Fifth Circuit, held that BP was only entitled to limited coverage for Macondo related claims as an Additional Insured under Transocean’s insurance policies. Specifically, the court held the Transocean insurance contracts included the language required to necessitate “consulting the drilling contract” to determine BP’s status as an additional insured. The court then found that, under the drilling contract, BP’s status as an additional insured was inextricably intertwined with the limitations on the extent of coverage to be provided by the Transocean policies. Further, the court found that the only reasonable interpretation of the drilling contract’s additional insured provision is that BP’s status as an additional insured is limited to liabilities assumed by Transocean in the drilling contract. As such, the court held BP is not entitled to coverage under Transocean’s policies for subsurface pollution because BP had assumed liability for subsurface pollution under the contract. The court took pains to identify distinctions in the verbiage of the Transocean policy versus the policy at issue in Evanston Ins. Co. v. Atofina Petrochems., Inc., 256 S.W.3d 660, 665 (Tex. 2008), in which the court held coverage for additional insureds must be determined by the coverage language in the policy, without regard to the underlying contract.

After issuing a ruling regarding the scope of additional insured coverage available to BP, the court then expressly declined to respond to the second question involving contra proferentum. As a result, contra proferentum remains the law in Texas, without any “sophisticated insured” exception.

When Discretion Means Denial Redux: How HUD Policies Continue to Deprive Housing to Persons with Criminal Records

We’ve been at this crossroads before—this is our Groundhog Day. In 2011, former Secretary of Housing and Urban Development (HUD) Sean Donovan urged HUD-supported affordable housing providers to use their discretion in admitting persons with criminal histories to housing. But a 2012 Shriver Center report found that affordable housing providers in Illinois were essentially using this discretion to enact far-reaching criminal background check admission policies. We found rental housing admission policies that denied admission to anyone who had ever been arrested for anything in their lifetime. Other policies went so far as to impose 100-year criminal background checks on applicants. In short, HUD’s unchecked deference to housing providers for their criminal background check policies resulted in draconian, blanket-ban formulas that could run afoul of civil rights laws. Our 2012 report urged HUD to take action to limit these policies and to ensure that housing providers make individualized determinations of an individual’s criminal history based upon the seriousness of the crime, how long ago it occurred, and any evidence of rehabilitation, among other factors. Since that report, however, HUD has taken no action to change its policies or curb troubling criminal background check policies by its housing providers.

Now, almost three years later, a review of over 300 admission policies from across the country has found that these problems are not unique to Illinois.  Indeed, draconian, blanket-ban admission policies among HUD housing providers are now the norm across the nation. Essentially, nothing has changed—public housing authorities and federally subsidized project owners continue to use their discretion, granted by HUD, to deny admission to applicants for arrests, and they frequently automatically exclude applicants with any kind of criminal record.

These housing admission policies are increasingly challenged as a violation of civil rights laws, something long recognized by the Equal Opportunity Employment Commission regarding aggressive employment background checks. HUD must acknowledge well-documented evidence of racial bias within the criminal justice system that results in racial minorities having disproportionate contact with that system. Because HUD is bound by civil rights laws it can no longer ignore the draconian policies it has essentially sanctioned. HUD’s Office of Fair Housing and Equal Opportunity should issue guidance, similar the EEOC’s, making clear to housing providers that some of these housing-related policies violate civil rights laws and can be considered a proxy for discrimination according to race. Current HUD Secretary Julian Castro should also go beyond what his predecessor did and ban the use of arrest records; ban lifetime or blanket bans; and obligate housing providers to make individualized determinations based on the seriousness of the crime, the number of years passed since the offense was committed, and any evidence of rehabilitation.

We’ve said this all before however. Now it’s time to start listening.