Governor Rauner, Stop Ignoring the Real State of Our State

Responsible Budget Coalition RallyIn Illinois, homebound seniors are losing meals. Hardworking low-income college students are being forced to drop out of school. Sexual assault victims and homeless veterans are going without services that are essential for their well-being.

This desperation and suffering is the true state of our state. And though you might not know it from listening to Governor Bruce Rauner’s State of the State address, it was made crystal clear when hundreds of Illinoisans descended on the Capitol last week.

A day ahead of Governor Rauner’s address, the Responsible Budget Coalition (RBC) coordinated four press conferences throughout the state to shed light on the real-life harm being caused by the enduring budget impasse. As those press conferences revealed, for many of our state’s most at risk people, living in Illinois in the absence of a responsible budget has meant living without vital services.

Julie Mavec, a case manager with Lutheran Child and Family Services of Illinois (LCFS), told the story of one Vietnam Veteran who, for five years prior to receiving her assistance, had been paying rent to live on a porch. With the help of Mavec and LCFS, that veteran is now in stable housing, has access to dental and health care treatment, and has been reunited with his children. The budget impasse, however, has caused LCFS to suspend some of its services, putting many veterans — like the one Mavec mentioned — at risk. “Without those services,” she concluded, “he would be out on the street — maybe even dead by now.”

For many low-income college students, the impasse has meant losing much-needed state financial support in the form of Monetary Assistance Program (MAP) grants, and thus having to drop out of school and forgo a shot at the American dream.

“It’s devastating to people like me,” said Hannah Mahaney, a single mother and full-time student at Robert Morris University. Hannah, who also works part time, explained that the suspension of MAP grant awards and cuts to daycare assistance due to the impasse are undermining her ability to finish school, provide for her daughter, and fulfill her potential. “Without quality childcare,” she added, “I will be left to wonder if my daughter is in good hands while I’m in school or at work.”

While deeply distressing, these individual stories are only emblematic of the broad-scale pain being inflicted by the budget impasse. So, in addition to highlighting these and other anecdotes, the RBC also released a report that details the extensive harm being done to individuals, communities, and local economies throughout the state.

But Governor Rauner would not need to read RBC’s report to get a sense of the damage being done. He would just need to listen to the voices of the nearly 600 Illinoisans from all around the state who gathered on the first floor of the Capitol hours before his address. After sharing more stories and rallying in the rotunda, the hundreds then marched to the third floor and urged state legislators to make them a priority.

“Hey hey, ho ho, budget cuts have got to go,” hundreds chanted in unison as lawmakers — Governor Rauner included — slipped into the House chamber for the address. The chants continued throughout the duration of Governor Rauner’s remarks, reaching such a volume that they could be heard inside the chamber.

Those calls, though loud, would fall on deaf ears. Despite the hundreds clamoring outside the chamber door, Governor Rauner treated the budget as an afterthought in his address — effectively turning a deaf ear on hundreds of concerned children, students, childcare providers, veterans, seniors, faith leaders, immigrants, and working families.

The Governor has yet to respond, but Illinoisans have delivered a lucid, powerful message: We have had enough. It’s time for Governor Rauner to stop holding the Illinois people hostage to his non-budget personal agenda. We want a budget that provides adequate revenue and does not impose painful cuts on our families and communities. Without one, our state will continue to grow ever weaker.

Trevor Brown contributed to this blog. 

Double-check existing policies for whistleblower coverage

Whistleblower lawsuits under the False Claims Act, also known as qui tam actions, have become more common in recent years. This is particularly so in heavily regulated industries and those in which the government routinely pays or reimburses costs, such as health care, pharmaceuticals, finance, construction and defense. Companies defending themselves against government investigations and FCA actions often have the insurance coverage they need — but frequently overlook it.

Our group recently authored an article in Business Insurance discussing insurance coverage for FCA investigations and actions. As discussed at greater length in the article, businesses facing whistleblower suits and government investigations often have coverage in standard policy types, including employment practices liability (EPL), errors and omissions (E&O), directors and officers (D&O), and commercial general liability (CGL) policies. For instance, EPL policies, which cover losses from claims stemming from wrongful employment practices, may respond to FCA claims because FCA suits frequently include a claim of retaliation by the whistleblowing employee. Where employment-related claims are also at issue and intertwined or interrelated with the FCA claims, courts have ruled that EPL insurers have a duty to defend the entire action.

E&O policies, which cover the wrongful acts of a policyholder in its performance of specified business services, may also respond to FCA claims and government investigations. While E&O policies usually exclude losses resulting from fraudulent conduct or intentional wrongdoing, coverage for defense costs and resolution of FCA claims may exist if the alleged conduct falls short of that; if the fraud or intentional conduct is proven at trial, by legal admission or by some other specified means; or if some other negligence of the insured is alleged.

D&O policies can also provide broad coverage for FCA claims or government investigations.  Under D&O policies, a covered “claim” may include civil, criminal, regulatory and administrative investigations. This can be beneficial in the FCA context, where a company can incur substantial costs merely responding to inquiries during an investigation.

CGL policies should also be considered as a potential source for recovery. These policies cover a variety of claims and circumstances, including suits seeking damages for bodily injury, property damage or personal and advertising injury resulting from an accident. These grants can be far broader in effect than they initially appear, as highlighted by a recent opinion issued by the U.S. Circuit Court of Appeals for the Fourth Circuit. The Fourth Circuit upheld a ruling requiring a CGL insurer to defend a pharmaceutical company facing an FCA complaint for its alleged role in a “pill mill” operation, finding that the allegations of the company’s “accidental” or “negligent” statutory violations were enough to demonstrate the potential for coverage.

Further, policyholders seeking this coverage should be cautioned to consider notice issues, as insurance companies will frequently rely on late notice defenses even if notice is delayed while a government investigation at issue remains under seal. If a seal is in place, the best practice may be to seek government permission to provide notice to the insurer or to provide the greatest amount of notice possible.

Time to End the Illinois Hostage Stand-Off

Dollar bill and calculatorIllinois’s former Governor Edgar had it right months ago. Edgar characterized current Governor Rauner’s refusal to negotiate a budget until he wins concessions on his ideological policy agenda as “hostage taking.”

Governor Rauner’s plan all along has been to force opponents to agree to his “Turnaround Agenda” before he will agree to engage in the budget process, including ensuring the revenues needed for a responsible budget. He set that situation up by asking the Democrats in the General Assembly to allow the temporary 5% income tax to expire a year ago, when it could have been extended prior to his being sworn in as governor. Governor Rauner wanted to propose his own budget solution. His own budget solution last February was to announce that he would not even consider or negotiate revenue until he had won the Turnaround Agenda. 

In other words, as Governor Edgar disapprovingly noted, Governor Rauner announced that he had taken hostages. Infants, children, seniors, people with disabilities, students, victims of violence and many others in need of state services are all being held hostage to Governor Rauner’s no-revenue budget proposal.

Like most hostage-takers, Governor Rauner knew that if his demands were not met, at some point the hostages would have to begin to die, literally or figuratively. And, sure enough, the dying is underway. 

For months now, thousands of service-providers have been making layoffs and reducing services because of the state not paying them for services rendered.  Last week the situation went to another level. Lutheran Social Services of Illinois (LSSI) announced late last week that, due solely to the state’s failure to pay over $6 million for services LSSI has rendered since last July, it is laying off 750 workers—43% of its workforce—and shutting down vital services for almost 5,000 people. The termination of these services—including residential drug and alcohol rehabilitation, mental health counseling, and help for homebound senior citizens—is not a consequence of a budget cut or a policy change; it is simply caused by the state’s failure to pay for services already rendered—one side keeping a contract, the other welching.    

LSSI, by all accounts, is an exemplary, responsible, low-overhead, values-driven provider of essential services to people deeply in need. LSSI partners with the state to implement state policies. But LSSI’s “partner” turned it into a hostage and let LSSI and the people it serves be casualties of the hostage stand-off. 

Another example: low-income students at the state’s public and private colleges and universities are dropping out of school by the thousands as the state fails to pay need-based student financial aid for which the students qualify and which they were promised. Many students cannot afford to start the second semester this month and are dropping out.Their schools “fronted” the grants in the first semester but cannot afford the millions of dollars it would cost to cover for the state again this semester.

All of these students are from low-income families, and virtually all of them are African American or Hispanic. They were following a dream of upward economic mobility through their own study and work—the American Dream. What kind of “Turnaround Agenda,” purportedly meant to strengthen Illinois’s economic picture, blocks the upward striving of low-income minority students and treats them as dispensable hostages?

In our form of government, the executive branch, led by the Governor, has the duty to “execute” state laws and policies—to govern. The Governor has decided instead that those laws and policies and the people they are meant to serve should be hostages.

Governor Rauner has every right to pursue a policy agenda, which he can do without abdicating his constitutional duty to govern. He can push his agenda through the legislative process. If he is forced to compromise because of political realities, then he can work to win more elections for people who agree with him. Through it all, however, he should have the sense of duty to govern. It is time to end the hostage stand-off and return to responsible governance.   

Insurance Coverage for Statutory Damages Under Professional Liability Policies

Increasingly, companies are being named as defendants in putative class actions, like those brought under the Fair Credit Reporting Act and Telephone Consumer Protection Act, involving violations of statutes that contain provisions mandating certain damages or ranges of damages. One question raised is whether “statutory damages” are uncovered “fines” or “penalties,” or whether they are covered losses.

Our group recently authored an article in FC&S Legal’s Insurance Coverage Law Report discussing coverage for statutory damages under professional liability policies. As discussed at greater length in the article, companies facing potential statutory damage awards or settlements should be mindful of four guidelines that can help ensure coverage for such damages under their respective professional liability policies: (1) where a statute calls the statutory damages at issue “damages” and/or separately sets forth punitive damages or a civil penalty, the statutory damages are compensatory in nature and do not constitute “penalties”; (2) where the exclusion is for “taxes, fines or penalties,” the term “penalties” must be read in context as payments owed to the government, not damages owed to individuals; (3) even if statutory damages are punitive or exemplary in nature, they may still be covered, because such damages are often explicitly covered in professional liability policies; and (4) any “penalties” exclusion must be strictly interpreted in favor of coverage and proven by the insurance company.

California Court Rejects Liberty Life Insurance Company’s Attempt to Apply ERISA Law to a Non-ERISA Disability Policy

Although this California non-ERISA disability policy litigation was not handled by our disability insurance lawyers, it is relevant to contract law for those who are employed by a state or federal government and have long term disability policies not covered by ERISA.

California insurance law, not ERISA, applies to a lawsuit against a disability insurer by a former government employee

The plaintiff in Klees v. Liberty Life Assurance Company of Boston, a former employee of the University of California, a governmental employer, was initially approved for long term disability benefits due to her many medical conditions, including fibromyalgia, seronegative inflammatory arthritis and injuries she had suffered in a car accident.

When Liberty terminated the plaintiff’s benefits, she filed a lawsuit alleging breach of contract and breach of the covenant of fair dealing. Liberty responded and, among other arguments, relied on published cases citing the Employees’ Retirement Income Security Act (ERISA) in a motion to dismiss the lawsuit. The California federal court labeled Liberty’s citations of ERISA law as a “red herring” in that ERISA specifically exempts government employers from its provisions.

The termination of long term disability came after three independent medical examiners determined the plaintiff could work in some capacity. Liberty tried to convince the court to apply the ERISA definition of disability instead of using the definition of disability as it was defined in the policy terms. The California federal court had no patience with Liberty stating, “ERISA cases are irrelevant to California insurance law.”

Since the question of whether or not the plaintiff was totally disabled under the terms of the contract required resolution under California insurance law, and not by the definition of disability found in inapplicable ERISA law, Liberty’s motion to dismiss the lawsuit was denied.

If you have questions regarding your claim for disability benefits, or if your disability claim has been denied, call Disability Attorneys Dell & Schaefer for a free consultation.

Racism, Public Safety, and the Legacy of Dr. King

We remember and celebrate the life, leadership and accomplishments of Dr. Martin Luther King, Jr., today, amidst the turmoil of police killings of Black and Hispanic youths, apparent cover-ups, and stark racial imbalance in the negative outcomes of our criminal justice system.  Paradoxically, on the day of Dr. King’s birth, the manner of his death—gunned down in public in in the midst of inescapable racial tension—resonates loudly in light of recent events. 

There is a lot to be said about the parallels between then and now: radicalized violence, unlimited access to guns, and an atmosphere of irresponsibly cranked-up, fear-mongering, hate-inducing rhetoric that mainstream leaders allow themselves to use, all but inviting or excusing in advance these atrocities. Those are the conditions that incubate, if not actually cause, things like the King and Kennedy assassinations of those days, and the bombings or health clinic massacres of today

Aside from the politics and ideology, however, is another parallel—the failure of our police and criminal justice systems to produce safety in low-income and minority communities. Dr. King’s killing was not just the shocking act of an armed zealot; it was an example—a heightened and special example, and yet at its core not all that unusual—of the role that the chronic lack of safety in lower income minority communities plays in blocking economic and social justice.

The analogy here may not be perfect, but the resonances are strong. At the time he was shot down, Dr. King was on a path to win economic justice for people in poverty (of all races), and a path that clearly laid out the inextricable relationship between economic justice and racial justice.

In Dr. King’s case, this fight for upward mobility—economic justice—was being conducted on the highly visible plane of politics and activism, and the breach of public safety that cut it short was also on that plane. Yet it was only unusual because of its visibility. Community violence as a blocking force against upward mobility was a fact then as much as now. It mattered then, as it does now, to individuals trying to take a bus to work or school or church or trying to operate a business. Racial, economic, and social causes producing lack of safety all existed. And, yes, there was a role for law enforcement in this problem, not just when it failed to produce public safety, but when it contributed to the lack of public safety through such scandals as rigged convictions and unjust punishment (including Dr. King’s own jail time), complicity in lynchings, protection of racial power structures, and more ordinary corruption.     

The failure to ensure public safety during Dr. King’s day resonates today as we deal with the incidents of police killings of minority youths. To be sure, each of these incidents is a puzzle to solve, from which we can learn lessons that produce justice across a range of issues. But they are also important examples of the larger challenge of public safety as an essential component of economic justice, and the essential role of policing (among other strategies) for producing and maintaining public safety, as opposed to contributing to a lack of it. In seeking justice, we should not forget to address the larger issue of public safety and how to train, deploy, and discipline the police to help accomplish it.


2016 Insurance and Risk Management Checklist

As we start a new year, there is no time like the present to evaluate your company’s insurance and risk management program and plan for the year. What should you consider as you move into 2016? Take a look at our checklist of questions you should consider now to evaluate your risk management program this year.

Updated Guide to Public Benefits in Illinois Will Help Postsecondary Students Get Ahead

You shouldn’t have to choose between making rent and making it to class or training, between putting food on the table and putting yourself in a position for a bright future, between getting by and getting ahead.

But unfortunately, these are the tough decisions that many students pursuing postsecondary degrees or job training have to make. And though most postsecondary students find it tough to support themselves, nontraditional students, including students who have dependents or who did not enter school immediately after high school, face particularly acute financial struggles. Take those enrolled in college: 79% nationwide work full or part time, and 29% have household incomes below $20,000.

Postsecondary education can be particularly challenging for women. About one out of every three woman enrolled as an undergraduate is raising a child, and women account for 81% of undergraduates who are low-income, single-parents. Juggling class or job training with work is an arduous and expensive venture in and of itself — but the added personal and financial responsibilities of parenting make it even more difficult and costly. 

Squeezed by the grind to make ends meet, many will be forced to drop out of school or discontinue job training, jeopardizing their future employment prospects and opportunities for upward mobility.

Public benefits can, and often do, serve as a critical resource for struggling students. Research has shown — time, time, and time again — that students with access to financial support are much more likely to graduate because they are able to dedicate more time to learning and less to stressing over bills.

The Shriver Center’s new publication, Getting Ahead: An Adult Student’s Guide to Public Benefits in Illinois, is intended to help struggling students get the help they need. The Guide offers information on eligibility and how to apply for a variety of benefits available to adult students. Benefits covered include SNAP (formerly Food Stamps), Temporary Assistance for Needy Families (TANF), healthcare, Child Care, and housing benefits, among others. The Guide also includes a section with tips on how students can better advocate for themselves and protect their right to the public assistance they need.

This updated version of the Guide is published online and has been redesigned to be more accessible and user-friendly. Now, students can find the resources they need more quickly, even on a mobile phone. A PDF of the full text is also available for download.

We invite you to pass Getting Ahead: An Adult Student’s Guide to Public Benefits in Illinois on to any students, educators, school counselors, administrators, or social service providers who may need guidance. We also encourage colleges, universities, job training providers, and other social service organizations to post the Guide on their sites.

It could be the difference, for many, between being held back and getting ahead. 

If you have any questions about how to use the guide, please email  

Trevor Brown contributed to this blog post. 

How HUD Can Help Fulfill the Promise of Second Chances

Over the holidays, President Obama commuted the prison sentences of 95 men and women, giving most of them an April 2016 release in place of indefinite imprisonment. To each person, he wrote that the president’s clemency power “embodies the basic belief in our democracy that people deserve a second chance after having made a mistake in their lives that led to a conviction under our laws."

Upon their release, however, these men and women may find that the rental housing market does not always offer the same second chance to the formerly incarcerated. To give them the best opportunity to move beyond their past mistakes, the Obama Administration will need to open more than the doors leading out of prison. It must also open the doors leading into housing. Otherwise, these men and women will be left with a false hope of redemption.

Citing the importance of stable housing to the successful reintegration of the formerly incarcerated, HUD (the federal agency that directs U.S. housing policy) issued a notice in November 2015 on the use of criminal records in federally subsidized housing. Although the notice touched upon important topics, such as the improper use of arrest records to prove criminal activity, it glossed over a number of issues that are critical to addressing housing barriers for people with criminal records.

To bring attention to those issues, the Shriver Center, with the assistance of the Housing Justice Network and over 50 other organizations, sent a letter to HUD with detailed recommendations for closing the gaps that its notice left behind.

Two critical issues call for urgent attention. First is the need for guidance on developing screening criteria in compliance with the Fair Housing Act (FHA). As explained previously, this guidance will help to curtail the unjustified, disparate racial impact of criminal records screening resulting from the racial disparities that pervade the criminal justice system. Such guidance is also long overdue, especially considering that the Equal Employment Opportunity Commission issued its policy on the use of criminal records under Title VII (the employment counterpart to the FHA) back in 2012.

Second, HUD guidance is also needed to outline a housing provider’s duty to limit its inquiry to a “reasonable time” before admission and to refrain from imposing blanket bans.

The letter to HUD discusses additional areas affecting people with criminal records that merit HUD’s attention. It asks specifically that HUD take the following actions:

  • use more affirmative language to emphasize that “one strike policies” are inconsistent with HUD’s stated commitment to expanding housing opportunities for people with criminal records;
  • require, rather than simply encourage, the consideration of mitigating circumstances across all the federally subsidized housing programs to put an end to automatic admission denials, subsidy terminations, and evictions on the basis of criminal records;
  • confirm that non-criminal citations, such as traffic and municipal violations, should not result in adverse housing decisions;
  • ensure that applicants and residents receive copies of criminal reports used against them, whether the reports come from the police or a tenant screening company;
  • clarify that public housing authorities can add people with criminal records onto current leases, such as with their family members, and that they receive the same rights as other household members;
  • eliminate rescreening requirements for participants who have already been previously screened for criminal activity, such as those trying to port their Housing Choice Vouchers, return to redeveloped public housing, or obtain special vouchers, such as Tenant Protection Vouchers and Enhanced Voucher; and
  • stress that civil rights requirements apply across all the federally subsidized housing programs, including Moving-to-Work jurisdictions and Rental Assistance Demonstration (RAD) conversions.

Given President Obama’s focus on criminal justice reform in the last year of his administration, the time is now for HUD to act upon these recommendations and fulfill the promise of second chances made to those who were granted clemency and to everyone like them beginning their lives again after incarceration.

On December 28, 2015, HUD sent a letter in response to the letter from the Shriver Center and other legal aid, policy, and civil rights organizations. A copy of the letter may be found here

365 Days Later: Lessons Learned from the Pennsylvania Supreme Court

One year ago today, the Pennsylvania Supreme Court issued the first two of four important insurance-coverage law opinions that it would hand down in 2014 and 2015. Those four decisions – which address a number of topics including insurer bad faith, trigger of coverage, policy exclusions, and settlements and reservations of rights – significantly impacted the legal landscape in the commonwealth.

While much has already been written about the specific holding in each of those cases, policyholders can still learn more from each of the decisions. Now – 365 days later – is a good time to reflect on those lessons:

  • Policyholders can counterbalance their insurers’ bad-faith unwillingness to approve a settlement by assigning their rights to recover statutory bad-faith damages to underlying claimants: In Allstate Property & Casualty Insurance Co. v. Wolfe, 105 A.3d 1181 (Pa. 2014), the court sustained a policyholder’s assignment of its right to recover against an insurer under Pennsylvania’s insurance bad-faith statute (42 Pa. Cons. Stat. Ann. § 8371) to an underlying tort claimant as part of a settlement. The insurer contended that such an assignment would violate public policy by allowing the transfer of what the insurer said was essentially a tort right, which would amount to champerty – something long prohibited in Pennsylvania. However, the court adopted an amicus position (advanced by Reed Smith) that as a matter of statutory interpretation, the legislature intended the right to statutory damages to be assignable. Assignability of these rights gives the policyholder leverage in encouraging its insurer to settle an underlying claim on reasonable terms (because of the insurer’s fear of facing that claimant in a bad-faith action), and also gives the policyholder a new item of value that it can use to fund a settlement with the claimant.
  • The “multiple trigger” approach is alive and well in Pennsylvania: In Pennsylvania National Mutual Insurance Co. v. St. John, 106 A.3d 1 (Pa. 2014), the court considered application of the multiple trigger theory of coverage in the context of a property damage claim. The insurer argued that the multiple trigger applied solely to asbestos-related claims. Although the court ultimately declined to apply the multiple trigger in Penn National, it did so after analyzing those elements that the court considered critical to its application, and distinguishing the relevant facts before it from those presented in the decision through which the court originally adopted the multiple trigger. The court’s analysis demonstrated that (1) there is no absolute bar to application of the multiple trigger outside the context of asbestos-related claims; and (2) courts addressing this issue must examine the specific facts of the claim presented to determine if they are consistent with application of the multiple trigger. The need for such a fact-specific analysis will weigh against efforts by insurers to obtain summary dismissal of coverage claims seeking application of the multiple trigger.
  • Policy language matters: In Mutual Benefit Insurance Co. v. Politsopoulos, 115 A.3d 844 (Pa. 2015), the court held that an “Employer’s Liability” exclusion precluded coverage only when an insured was sued by its own employee and not by an employee(s) of a co-insured. In reaching this conclusion, the court focused on the disparate usage of the definite article (“the” insured) and the indefinite article (“an” or “any” insured) in the policy at issue (a point highlighted in an amicus brief prepared by Reed Smith). The court’s focus on such subtle differences in language is a good reminder to policyholders of the importance of the specific wording used in their policies, and the need to understand the effects of specific policy language.
  • The requirement to obtain carrier consent to settle is not absolute: In Babcock & Wilcox Co. v. American Nuclear Insurers, — A.3d —-, 2015 WL 4430352 (Pa. July 21, 2015), the court adopted a reasonable settlement rule in cases where an insurer is defending the case under a reservations of rights: If the policyholder presents a reasonable settlement demand within policy limits to its insurer and the insurer refuses to consent, the insurer has breached the policy, and the policyholder is free to settle the case and seek to recover the reasonable settlement amount from its insurer. As such, policyholders must seek their insurers’ consent to settle, but will not necessarily forfeit coverage by entering into a reasonable settlement over their insurers’ objections.

If you have any questions, or would like assistance applying these lessons to the specific facts of your situation, please contact the authors of this blog.