Insurers Forfeit Their Protections Under Civil Code Section 2860 (Cumis Statute) When They Fail to Meet Their Duty to Defend ObligationsJune 27, 2013 Robert McKennon
If you want to read an important case on Cumis counsel and the consequences to insurers who fail to fulfill their obligations relating thereto, we have one for you. J.R. Marketing LLC v. The Hartford Cas. Insurance Co., __ Cal.App.4th __ (May 17, 2013). This case has a lot to offer: Cumis counsel, attorneys’ fees, Buss allocations, duty to defend, and insurance bad faith issues. In this case, the California Court of Appeal for the First District handed down a very important decision that is highly beneficial to insureds and their independent counsel (i.e., Cumis counsel). Significantly, the court expanded upon the limitations on the ability of insurers to impose upon their insureds’ choice of defense counsel when they do not properly defend their insureds, most likely committing insurance bad faith. Specifically, the Court found that insurers who wrongfully refuse to defend their insureds are barred from maintaining suits against their insureds’ independent counsel for reimbursement of fees and costs charged by such counsel and are barred from relying on the protections afforded insurers under Civil Code section 2860.
Can an ERISA Claims Administrator Engage in Post-Trial Discovery Regarding Benefit Issues? No, Says District CourtJanuary 21, 2013 Scott Calvert
In what may be a matter of first impression, Judge Cormac J. Carney of the United States Federal District Court for the Central District of California denied Sun Life and Health Insurance Company’s Objections to Proposed Judgment in an ERISA long-term disability insurance claim case handled by McKennon Law Group PC. As detailed here, Robert J. McKennon and Scott E. Calvert of the McKennon Law Group secured a victory at trial for their client in an ERISA long-term disability insurance claim lawsuit against Sun Life, with the Court finding that Sun Life abused its discretion in denying Mr. Evans’ claim for long-term disability benefits. Following the Court’s instructions, Mr. Evans filed a “Proposed Judgment Following Trial.” Sun Life offered four separate objections to the Proposed Judgment, all of which were rejected by the Court.
This article will be the second in a series of articles by McKennon Law Group PC addressing and answering basic questions concerning insurance law. This one addresses: What are the available remedies against an insurance company that has acted unreasonably in handling an insurance claim?
The most common causes of action against insurers in the non-ERISA context are breach of contract and bad faith.
The breach of contract claim allows an insured to recover policy benefits owed under the insurance policy plus applicable interest from the date the benefits were due (or at the rate of 10% on delayed disability payments in California). The benefits due will depend on the type of policy at issue. They may be a specific amount (e.g., death benefits) or may depend upon a proof of loss (e.g., value of property damaged or destroyed).
Last month, the U.S. Supreme Court handed ERISA plan participants a big victory when they decided the important ERISA disability case of Hardt v. Reliance Standard Life Insurance, __ U.S. __ (Decided May 24, 2010)(see our blog discussion here) holding that an ERISA plan participant may be able to collect attorneys’ fees from a plan or claim administrator without obtaining a judgment in the action. It did not take long for the Ninth Circuit Court of Appeals to apply Hardt. In Simonia v. Glendale Nissan/Infiniti Disability Plan, __ F.3d __ (9th Cir. June 24, 2010), the court rejected a plan participant’s claim for attorney’s fees.
In Simonia, Aleck Simonia became physically disabled due to a herniated disc. He had disability insurance under his employer’s group insurance plan, which was ultimately insured by the Hartford Insurance Co. Hartford concluded that Simonia was no longer physically disabled but had a mental disorder subject to his ERISA plan’s twelve-month payment limit. Hartford also learned that Simonia had been awarded $1,551 per month in Social Security Disability Insurance (“SSDI”) benefits retroactively, which should have been offset against his payments from Hartford. Thus, Hartford informed Simonia he would be receiving payments subject to the plan’s twelve-month mental disorder limit and that he owed Hartford $22,310.
Simonia sued Hartford for improperly reclassifying his disability as a mental disorder. Hartford filed a counterclaim to recover its overpayment. Simonia informed Hartford that the Social Security Administration had retroactively reduced his SSDI award, and he requested that Hartford recalculate the alleged overpayment. The parties later settled the counterclaim and stipulated to its dismissal. Simonia did not prevail in his claims against Hartford for continuing benefits. Simonia thereafter filed a motion seeking $63,745 in attorney’s fees because he “was successful as a counter-defendant in that the defendant dismissed its counterclaim.”