Helpful Tips to Policyholders: Pay Close Attention to Plan's Limitations Provisions

Posted in: Case Updates, Disability Insurance, ERISA, Insurance Questions and Concepts, Policy Interpretation, Statute of Limitations March 06, 2014

Do you have a disability insurance policy, health insurance policy or life insurance policy through your work?  If you do, you should read this article as you may miss some important deadlines if you do not. The Supreme Court’s recent  holding that the limitations periods in employer-sponsored plans are enforceable, even where such limitations periods began to run before a cause of action accrued, had a rippling effect through federal courts, the insurance bar and participants alike.  Under the Employee Retirement Income Security Act of 1974 (“ERISA”), participants must exhaust the plans’ administrative process before bringing suit.  Previously, the Ninth Circuit and majority of circuit court of appeals had held that the statute of limitations for filing suit under ERISA commenced after an insured exhausted all administrative remedies.  However, the high court explained that a plan may impose a particular limitations period, which begins from the date proof of claim is due, rather than after the conclusion of the administrative process.  Heimeshoff v. Hartford Life & Accident Insurance Co. et. al., 134 S. Ct. 604 (2013).  Below, we examine the implications Heimeshoff has for insureds and provide helpful tips.

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The Reasonable Expectations of the Covered Party, Even an Additional Insured, Determines the Interpretation of Ambiguous Policy Language

Posted in: Case Updates, Duty to Defend, General Liablity, Policy Interpretation January 27, 2014

In California, courts have long held that where a policy provision is ambiguous because it is susceptible to multiple interpretations, the reasonable expectation of the covered party governs.  But which parties’ objectively reasonable expectations should govern where there are both a named insured and an additional named insured claiming coverage?  In its significant decision in Transport Insurance Company v. Superior Court of Los Angeles County, __ Cal. App. 4th __, 2014 Cal. App. LEXIS 28 (Jan. 13, 2014), the Court of Appeal of California held that it is the objectively reasonable expectation of each party seeking coverage that is applied in determining the meaning of language within an insurance contract as it applies to that party, even where it is an additional insured who is not a party to the contact.

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Supreme Court Looks at ERISA Plan Terms to Govern Limitation Periods to File Lawsuits

Posted in: Case Updates, Disability Insurance, ERISA, Policy Interpretation, Statute of Limitations December 18, 2013

In a highly anticipated decision, a unanimous United States Supreme Court held that insureds with employer-sponsored plans are contractually bound by the limitations periods set forth in their plan documents.  These limitations periods, which specify when insureds must file any legal actions under the Employee Retirement Income Security Act of 1974 (“ERISA”), are enforceable so long as they are not unreasonably short.  The Court held in Heimeshoff v. Hartford Life & Accident Insurance Co. and Wal-mart Stores, Inc., __ U.S. __ , 2013 U.S. LEXIS 9026 (Dec. 16, 2013), that the Plan’s contractual limitations period governs when a participant/beneficiary may file a legal action.  The Court concluded that the Plan’s contractual statute of limitations period was enforceable and that the time spent in the administrative claims process did not toll the running of the statute.

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Insurers Have a Duty to Defend at the Outset of Litigation Even If a SIR Has Not Been Exhausted

Posted in: Case Updates, Commercial General Liability Insurance, Duty to Defend, General Liablity, Policy Interpretation October 16, 2013

Insurers providing general liability insurance cannot shirk their duty to defend insureds at the outset of litigation by relying on self-insured retention (SIR) provisions in those policies unless the policies expressly and unambiguously make the insurer’s duty to defend contingent upon the SIR.  So held the Fourth District Court of Appeals in American Safety Indemnity Company v. Admiral Insurance Company, __ Cal. App. 4th ___, 2013 Cal. App. LEXIS 779 (2013).  The court’s decision in American Safety is highly favorable to insureds because it substantially limits the ability of insurers to circumvent their obligation to pay first-dollar for the defense of their insured by arguing that the SIR has not been exhausted. 

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Property Insurers May Be Liable to Owners for Loss of Rents Resulting from Damaged Property

Posted in: Breach of Contract, Case Updates, Insurance Bad Faith, Policy Interpretation, Property & Casualty Insurance September 25, 2013

Commercial property owners may recover lost rental income from their insurer if they are unable to rent out damaged property, absent clear policy exclusions.  The California Court of Appeal recently held the owner of commercial property has a reasonable expectation of coverage for loss of rent, even if the property was not leased out at the time the damage occurred.  Ventura Kester, LLC v. Folksamerica Reinsurance Company, 2013 DJDAR 12253 (September 11, 2013).  The court explained that if insurers want to limit loss of rent coverage to leases in force at the time of the damages occur, such limitations must be plainly stated in the policy.   Ventura is significant because it limits insurers’ abilities to take advantage of ambiguous policy language as a means to deny coverage.

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Insurer's General Reservation of Rights Does Not Entitle Insured to Cumis Counsel

Posted in: Commercial General Liability Insurance, Directors & Officers Insurance, Duty to Defend, Policy Interpretation, Property & Casualty Insurance September 05, 2013

In a recent ruling, the California Court of Appeal held that an insurer’s general reservation of rights to deny coverage of damages outside its policy does not create a conflict of interest with the insured, such that the insured in entitled to Cumis counsel.  The decision in Federal Insurance Co. v. MBL, Inc. __ Cal. App. 4th __,  2013 Cal. App. LEXIS 679, 2013 WL 4506149 (August 26, 2013) follows California precedent denying insureds the right to select independent counsel at the insurer’s expense absent an actual conflict of interest.

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Court Refuses to Enforce Health Net Arbitration Provision Because It Was Insufficiently Prominent

Posted in: Health Insurance, Policy Interpretation March 08, 2012

In the unpublished case of Probst v. Superior Court (Health Net of California, Inc., et al), No. A133742 (March 6, 2012), Division Five of the First Appellate District refused to enforce an arbitration provision in an enrollment form.  Brian Probst (who filed a putative class action alleging that Health Net of California, Inc. and Health Net, Inc (“Health Net”) failed to adequately protect private personal and medical information from unauthorized disclosure to third-parties) sought writ relief from an order compelling him to arbitrate his claims against Health Net.  The Court granted the requested relief because the health plan enrollment form signed by Probst failed to comply with the disclosure requirements of the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act, Health & Saf. Code, § 1363.1, subdivision (b)), rendering the arbitration agreement unenforceable.

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California Court of Appeal Affirms Ruling That a Mental Disorder Accompanied by Physical Symptoms is Not Subject to a Policy's Two-Year Limitation for Mental Claims

Posted in: Disability Insurance, Insurance Bad Faith, Policy Interpretation February 16, 2012

In 2009, the California Court of Appeal in Bosetti v. The United States Life Ins. Co., 175 Cal. App. 4th 1208 (2009) addressed whether a two-year benefits limitation on disability insurance payments for “mental, nervous or emotional disorder[s]” could properly serve to limit benefits payable to an insured who was disabled from depression and anxiety, but who also complained of interrelated physical impairments.  The California Insurance Litigation Blog summarized that holding here, but basically, the Court ruled that the policy’s two-year mental limitation was ambiguous and an insured would reasonably expect that disabling depression arising from a physical condition, would not be subject to the limitation.  (The Court also ruled that there was a genuine dispute regarding whether U.S. Life’s claim decision violated the covenant of good faith and fair dealing.)

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Failure by ERISA Administrator to Comply With Its Duties of Proper Notification and Review May Result in Its Failure to Assert the Statute of Limitations

Posted in: Case Updates, Disability Insurance, Policy Interpretation September 01, 2011

Recently, the Ninth Circuit Court of Appeals ruled that an ERISA administrator must make a “clear and continuing repudiation” of a claim, in compliance with its duties of proper notification under ERISA, in order for a claim to “accrue” and thus start the statute of limitations clock on filing a lawsuit.  In Withrow v. Basch Halsey Stuart Shield, Inc. Salary Protection Plan, __ F.3d. __ (9th Cir. 2011), the United States Court of Appeals for the Ninth Circuit  held that a telephone call and resulting voicemail message made by the administrator, which was otherwise undocumented, did not constitute proper notice to a claimant that a benefits decision constituted an irrevocable and final determination.  The court explained that such a notification was deficient, and therefore cannot serve as the basis for an argument that a complaint was untimely filed.

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Why Does The Pollution Exclusion in California Insurance Policies Exclude Asbestos Building Contamination But Not Pesticide Building Contamination?

Posted in: Case Updates, Commercial General Liability Insurance, Duty to Defend, Homeowners Insurance, Insurance Bad Faith, Legal Articles, Policy Interpretation, Property & Casualty Insurance August 22, 2011

According to a recent California appellate court decision, a contractor’s negligent release of asbestos fibers during the removal of asbestos-containing acoustical spray in a condominium complex is excluded by the pollution exclusion in a homeowner association’s property and liability policy, despite a 2003 California Supreme Court ruling that a contractor’s negligent spraying of pesticide in an apartment complex is not excluded by a similar pollution exclusion in an apartment owner’s policy.  The Villa Los Alamos Homeowners Association v. State Farm General Insurance Company, __ Cal. App. 4th __, 2011 WL 3586475 (August 17, 2011).  How can that be?

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