Robert J. McKennon Named Corporate LiveWire’s Global Awards 2015 Insurance & Risk Management Lawyer of The YearMay 12, 2015 Robert McKennon
McKennon Law Group PC is proud and honored to announce that Robert J. McKennon, founding shareholder of McKennon Law Group PC, has been named as Corporate LiveWire’s Global Awards 2015 Orange County, California Insurance & Risk Management Lawyer of the Year. The annual Global Awards Lawyer of the Year recognition honors the achievements of those individuals that have consistently shown best practice and demonstrated general excellence in every endeavor on a global and national level.
The Corporate LiveWire Global Awards 2014 Lawyer of the Year winner’s guide is available here.
Robert J. McKennon and Joseph McMillen Publish Article in Los Angeles Daily Journal: “When Insurers Rescind, They Must Act Fast”April 02, 2015 Iris Chou
The April 1, 2015 edition of the Los Angeles Daily Journal features an article written by Robert McKennon and Joseph McMillen of the McKennon Law Group entitled: “When Insurers Rescind, They Must Act Fast.” In the article, Mr. McKennon and Mr. McMillen discuss the California Court of Appeal’s decision in DuBeck v. California Physicians’ Service, 2015 DJDAR 2629 (Cal. App. 2d Dist. Mar. 5, 2015), which held that Blue Shield of California (“Blue Shield”), waived its right to rescind her health insurance policy and, therefore, her claim was covered. While Ms. DuBeck had allegedly willfully misrepresented material facts about her medical condition on her application, the appellate court found that even if she had done so, Blue Shield waived its right to rescind.
The article is posted below with the permission of the Los Angeles Daily Journal.
When insurers rescind, they must act fast
By Robert J. McKennon and Joe McMillen
Did you disclose your material medical history on your health insurance application?
What about your application for disability or life insurance? Be careful that you do or
you may find yourself without insurance when you need it most like Bonnie DuBeck
did when she learned she had breast cancer that her insurer would not cover because she allegedly misrepresented her medical condition.
Fortunately for DuBeck, the California Court of Appeal in DuBeck v. California
Physicians’ Service, 2015 DJDAR 2629 (Cal. App. 2d Dist. Mar. 5, 2015), held her
insurer, California Physicians’ Service, doing business as Blue Shield of California,
waived its right to rescind her health insurance policy and, therefore, her claim was
covered. While DuBeck had allegedly willfully misrepresented material facts about her
medical condition on her application, the appellate court found that even if she had
done so, Blue Shield waived its right to rescind. Looking at the facts, one wonders how the trial court did not easily reach the same conclusion.
On Feb. 16, 2005, DuBeck submitted a signed application for health insurance to
Blue Shield. Five days earlier, she had visited the Revlon UCLA Breast Center where a nurse performed a “fine needle aspiration” on a lump in her left breast that had
developed after she ran into a cabinet. On the nurse’s advice, DuBeck scheduled a
mammogram and consultation with a breast surgeon for Feb. 17, the day after she
submitted the insurance application.
DuBeck was asked on the application whether she ever had treatment or symptoms
related to potential breast problems or had been advised to have a physician conduct
an exam or further testing which had not yet been performed. DuBeck answered “no”
to each question, omitting material information about her recent and upcoming breast
procedures. On April 1, 2005, Blue Shield issued a health insurance policy to DuBeck
without knowing about her breast exam, procedures and potential health problems.
The lump turned out to be malignant. In the months that followed, DuBeck had breast
surgery and other related medical procedures. In April and May 2005, DuBeck started
submitting claims to Blue Shield under the policy for the medical services. Blue Shield
did not pay for the claims, but suspended processing them. It explained the services
might not be covered under the policy’s preexisting condition exclusion and that it
needed to investigate further.
Blue Shield continued to collect DuBeck’s premiums, $19,600, for the next seventeen
months. It paid for her other claims unrelated to her breast cancer. It did not rescind
the policy during that period.
Seventeen months after Blue Shield issued the policy, on Sept. 8, 2006, it sent
DuBeck a letter explaining it had determined she had not provided complete and
accurate information on her insurance application. Namely, she failed to disclose the
fine needle aspiration procedure, a mammogram and a breast surgeon exam. With full
knowledge that DuBeck had undergone breast cancer surgery and had submitted a
claim to Blue Shield to cover the costs of these procedures, Blue Shield decided to
terminate the policy prospectively rather than rescind it. The letter stated, “Blue shield
has determined that, rather than rescind the coverage completely, your coverage was
terminated prospectively and ended effective today, September 8, 2006.” Blue Shield
also promised to cover and pay for any covered services prior to the termination date.
On the same date Blue Shield sent DuBeck the letter, it sent her a “Certificate of
Creditable Coverage” confirming that her coverage began April 1, 2005, and ended
September 8, 2006. The certificate stated that it was “evidence of your coverage under this plan.”
Two years later, because it had still refused to pay for her breast cancer surgery and
related services, DuBeck sued Blue Shield for breach of the insurance contract and bad faith, among other claims. Blue Shield asserted an affirmative defense that the policy was subject to rescission because DuBeck had willfully misrepresented material facts in her application, rendering the policy void ab initio. It moved for summary judgment on that defense, which the trial court granted.
DuBeck appealed and argued Blue Shield waived any right to rescind the policy. The
Court of Appeal agreed, reversed the trial court, and found waiver as a matter of law.
The court noted rescission extinguishes a contract, rendering it void ab initio, as if it
never existed. Rescission is, of course retroactive, rendering a contract or insurance
policy unenforceable from the outset. Cancellation, however, is prospective. To rescind under California law, the insurer must return to the insured all the premiums paid, unlike cancellation.
It is established California law that an insurer has the right to rescind a policy when
the insured misrepresented or concealed material information in seeking to obtain
insurance. Nieto v. Blue Shield of California Life & Health Ins. Co., 181 Cal. App. 4th
60, 75 (2010). However, that right, like any other, can be waived: “An insurance
company will be deemed to waive any ground which would otherwise entitle it to
rescind a policy … when, despite knowledge of the facts giving it the option, it impliedly recognizes the continuing effect of the policy.” Pierson v. John Hancock Mut. Life Ins. Co., 262 Cal. App. 2d 86, 91 (1968); see also Silva v. National American Life Ins. Co., 58 Cal. App. 3d 609, 61516 (1976).
In general, to constitute a waiver, there must be an existing right, a knowledge of its
existence, an actual intention to relinquish it, or conduct so inconsistent with the intent
to enforce the right as to induce a reasonable belief that it has been relinquished.
Pacific Business Connections, Inc. v. St. Paul Surplus Lines Ins. Co., 150 Cal. App. 4th 517, 525 (2007), quoting Klotz v. Old Line Life Ins. Co. of America, 955 F. Supp. 1183, 1186 (N.D. Cal. 1996).
Under this authority, the Court of Appeal held that Blue Shield waived its right to
rescind the policy as a matter of law, finding the insurer’s conduct was “so inconsistent with the intent to enforce the right [to rescind] as to induce a reasonable belief that it has been relinquished.” The court reasoned Blue Shield told its insured it was terminating the policy prospectively rather than rescinding it, that all her claims prior to the cancellation date would be covered, and retained her premiums.
Additionally, the court explained that in 2009, the Legislature enacted Health and
Safety Code Section 1389.21, which prohibits an insurer governed by the KnoxKeene
Health Care Service Plan Act from rescinding or canceling a health care service plan
contract for any reason more than 24 months following its issuance. Although the
effective date of the statute was January 2010, the court stated: “we find support for
our decision in the Legislature’s judgment that two years is ample time for an insurer to uncover any misrepresentations made in an application and determine whether to
rescind or continue coverage.”
The court determined that Blue Shield first asserted its right to rescind DuBeck’s
policy (during litigation) over three and a half years after issuing it, and more than two
years after admittedly learning the truth about appellant’s medical condition. The court
concluded these facts established Blue Shield had engaged in conduct so plainly
inconsistent with an intent to enforce the right to rescind the policy that it had waived
that right. That Blue Shield first attempted to rescind the policy in litigation after it
represented that it would cancel the policy, but not rescind it, made this outcome
This case teaches that insurers must promptly rescind the policy and return all
premiums upon learning of material misrepresentations in the application. They
cannot engage in conduct inconsistent with a right to rescind that would lead an
insured to reasonably believe the policy is still in effect. California courts will not
hesitate to find waiver as a matter of law in that scenario.
The McKennon Law Group is proud to announce that prominent insurance attorney Joe S. McMillen has joined the Firm. Like the other attorneys of the Firm, Mr. McMillen has a stellar academic background, graduating in the top 1% of his class at University of California at Los Angeles, before earning his juris doctorate at the University of San Diego, School of Law. He is admitted to all federal and state courts in California, and has been admitted pro hac vice in Hawaii, Kansas, Missouri, Nevada, South Carolina, Utah and Washington.
In addition to his academic credentials, Mr. McMillen brings two decades of experience litigating insurance coverage and bad faith claims, as well as complex business disputes, representing plaintiffs/insureds. Mr. McMillen has significant experience in every aspect of the litigation process, and over the course of his twenty-year career, he has taken hundreds of depositions, participated in numerous mediations, arbitrations and trials.
We are excited to welcome Mr. McMillen to the firm, and he is enthusiastic to use his vast experience and knowledge to assist the firm’s clients in obtaining the benefits/damages to which
they are rightfully entitled.
The January 8, 2015 edition of the Los Angeles Daily Journal featured Robert McKennon and Scott Calvert’s article entitled: “Expanding Equitable Remedies in ERISA Cases.” In it, Mr. McKennon and Mr. Calvert discuss a new case, Gabriel v. Alaska Electrical Pension Fund, 2014 DJDAR 16590 (9th Cir. 2014), which discusses equitable remedies in ERISA cases and in particular how the Ninth Circuit Court of Appeals has joined other circuits in allowing various equitable remedies, most especially the surcharge remedy which may allow ERISA claimants to obtain monetary relief.
Insurance Commissioner Dave Jones announced that during the 2014 legislative session that Governor Jerry Brown signed nine bills sponsored by the California Department of Insurance (“CDI”). A bill that adds protections for small businesses that took effect in 2014 and five other consumer protection bills that were implemented January 1, 2015. Here is a list of them (taken from a CDI bulletin):
McKennon Law Group PC founding partner Robert J. McKennon will speak on an MCLE panel for the Orange County Bar Association Insurance Law Section on August 27, 2014 discussing “Recent Developments and Interesting Issues in Life Insurance Law.” Mr. McKennon, an attorney who currently represents insurance claimants after over two decades representing insurers, and Laura K. Kim, an attorney who currently represents insurance companies, agents and brokers in insurance litigation will provide information to help litigators assess the issues associated with life insurance litigation to ensure that counsel for both parties are able to properly represent their clients. The MCLE event is scheduled to take place at the OCBA headquarters from 12:00 PM – 1:30 PM and registered attendees will receive 1.0 hour of MCLE credits
New California Law Requires that Short-Term Disability Policies Provide Coverage for Severe Mental IllnessAugust 05, 2014 Scott Calvert
In a victory for insurance consumers and mental health advocates, a recent change to the California Insurance Code mandates that short-term disability insurance policies provide coverage for “severe mental illnesses” as that term is defined in the Insurance Code.
Passed in 2013, and signed in to law by Governor Jerry Brown on October 4, 2013, Assembly Bill No. 402 (“AB 402”) added Section 10144.55 to the Insurance Code, effective July 1, 2014. Section 10144.55 requires that every disability insurance policy with “a short-term limited duration of two years or less,” provide coverage for disabilities caused by severe mental illnesses. Section 10144.55(b) defines “severe mental illnesses” as schizophrenia, schizoaffective disorder, bipolar disorder (manic-depressive illness), major depressive disorders (including postpartum depression), panic disorder, obsessive-compulsive disorder (OCD), pervasive developmental disorder (autism), anorexia nervosa or bulimia nervosa.
A disturbing trend that has developed across the country in recent years is that, while the number of workers/employees suffering from long-term illnesses or injuries has increased, the number of employers who provide long-term disability insurance has dropped dramatically. As of May 2014, the total number of Social Security disability beneficiaries in the United States hit an all-time high of about 11 million beneficiaries. However, fewer employees are covered with long term disability coverage. The number of U.S. workers with long-term disability coverage decreased 6% from 2009-2013. Below are just a few of the worrying statistics. From 2009-2013 nationwide:
- The number of employers offering long-term disability coverage decreased from 220,000 to 213,000;
- The number of employees who have long-term disability coverage decreased from 34 million to 32.1 million (6% decline); but,
- The number of employees in the U.S. workforce has increased by 6.6 million.
More and more employers are opting to drop their standard disability insurance plans for optional employee-paid plans. Additionally, more companies are implementing “defined benefit plans,” which allocate a certain amount of funds for each worker to use for all insurance coverage. This often has the effect of forcing workers to forgo some types of coverage, such as long-term disability insurance, because the funds provided are not sufficient to cover all types of insurance.
Policyholder Wins Handed Down in Insurance Decisions. Daily Journal Publishes McKennon Law Group PC Article.February 12, 2014 Scott Calvert
The February 10, 2014 edition of the Los Angeles Daily Journal featured Robert McKennon’s article entitled: “Policyholder Wins Handed Down in Insurance Decisions.” In it, Mr. McKennon discusses six insurance decisions handed down in California and federal courts in 2013 that were favorable to policyholders.
The November 21, 2013 edition of the Los Angeles Daily Journal featured Robert McKennon’s article entitled: “Equitable remedies gain favor in ERISA cases.” In it, Mr. McKennon discusses a significant development in the Employee Retirement Income Security Act of 1974 (ERISA) in the last couple of years. This significant development is due to the 2011 U.S. Supreme Court decision in Cigna Corp. v. Amara, 131 S. Ct. 1866 (2011). In that case, the Supreme Court indicated a shift away from the federal courts aversion to the granting of equitable remedies in ERISA cases, especially equitable estoppel. The Seventh and Fourth Circuit Courts have started a trend in applying equitable estoppel claims by both plan participants and beneficiaries. The article is posted here with the permission of the Daily Journal.