Saturday, November 22, 2014

Is This How Homeowners Insurance Normally Works?

Recently I handled a breach of contract in a homeowners insurance case.  The facts seemed straightforward enough but the way the homeowners insurance address the matter seem strange.  The insurance company is one of the major players in the American market.  I don't think I need to name them because I believe it could've been any of the companies.

The facts are as follows.  The homeowner was in his 70s and had been with this company for several decades.  He had owned his home for more than 50 years.  He was a veteran who was honorably discharged and he was retired.  He may have been widowed, he was living alone.  Early on in 2014 he had a heart attack.  That heart attack put him in the hospital for several weeks.  After he was discharged from the hospital he was put into a rehabilitation center for several months.  Early on in the hospital one of his relatives told him that the roof of his home it sprung a leak through the roof.  They promptly contacted his homeowners insurance company.  Several weeks after contact the homeowners insurance contracted with a company to put a tarp over the roof.  By that time the water had entered the home and damage was done and there was a mold problem.

Rather than tackle the problem immediately the homeowners company kept dragging their feet.  The man's relatives would give estimates to the insurance company for the work that needed to be done.  For whatever reason they would not pay the estimates.  The home was uninhabitable.  When the man was done with rehabilitation he had to live in a hotel.  The homeowners insurance was paying that but they would not take care of the home.

Finally in September or October of this year the family hires me because the insurance company wants to take an examination under oath of the homeowner.  An examination under oath is similar to a deposition.  It is normally in the insurance policy that the insured has an obligation to reasonably cooperate with the insurance company.  Why they wanted to take this examination of this man was not clear to me.

After I was hired I contacted the insurance company and requested the full policy.  The policy was approximately 20 pages long.  It seemed like a fairly standard policy in that the first couple of pages provided the benefits that the insured would receive in case of a loss and the next 18 pages systematically limited or withdrew those benefits.  There were sections in the policy about lack of coverage if the home is vacant.  There were other sections about lack of coverage if there was lack of maintenance.

I was thinking that they would deny coverage because the home was vacant and he was in the hospital.  I was thinking they would try to deny coverage because perhaps they would argue that he was negligent in maintaining his roof.  In either case I was thinking this is outrageous.  The man pays premiums for decades and has a heart attack and they're going to claim that he had left his property vacant?  They were going to claim that he was negligent in not maintaining his roof?  His roof was watertight, he had no evidence or notice that there was any problem until the leaking began.  I was thinking this was a wonderful case to present to a jury for breach of contract.  Retired war veteran is insured for decades with his company and it takes them more than one half of the year to resolve the problem.

The attorney that took the examination of the insured was decent.  She was just following orders.  She took her information.  When she was done with the examination I made it quite clear that this was outrageous conduct on behalf of the insurance company.  They kept this man many months out of his home because they were looking for ways to deny coverage.

Ultimately they agreed to pay one of the estimates that the homeowners had provided.  It was one of the medium estimates.

Strangely, along with the check payment came a full release.  The full release made no sense to me.  What if during the repair of the home they discovered more damage from the water leak.  My client would be prohibited from making a further claim.  I spoke to a colleague who regularly represents insurance companies and he advised this is quite normal.  It makes no sense to me.  For a contract to be valid there must be consideration.  Consideration is a legal term meaning there needs to be something of value exchanged during the contract.  The insurance company wasn't giving anything extra, they were providing what they were obligated to provide in exchange for the premiums.  They were obligated to provide coverage.  They provided that coverage.  If there was more damage they should be obligated to pay for the extra damage.  My client was tired of fighting and he accepted the release.

I also argued to the insurance company that they must guarantee that they will not cancel his coverage because of the claim.  It is not unusual in a homeowners claim for the insurance company to cancel the policy after the claim.  What a business.  Can you imagine going to a restaurant, ordering the food, receiving the food and then only being able to look at it.  You can't touch the food.  Kind of like homeowners insurance.  If you use it you lose it.  The insurance company would not guarantee that either.

At least I got my client coverage for his loss.  I wish I could've done more.

I think that the take away from this is read your homeowners policy.  You might have much less coverage than you think you really do.

Wednesday, November 12, 2014

Personal injury and subrogation by health insurance

If you have been injured in an accident which is the fault of another and you have health insurance benefits you should be aware that the legal landscape has been changing in favor of the health insurance companies. This blog is more of a heads up rather than a full legal treatise. In other words, it is putting you on notice rather than fully informing you of your obligations to your health insurance company.

1. If you have Medicare or Medicaid there is a detailed and somewhat cumbersome process in terms of reimbursing any payments that they have made on your behalf. If you do not make proper reimbursements it is possible that they can come after you and also your attorney and perhaps even the insurance company of the tortfeasor.

2. If you are self-insured, and sometimes that is not obvious because it seems like an insurance company is administering the self-insurance plan, you are likely required to pay back 100% of any benefits that they paid. A recent Supreme Court case, U.S. Airways, Inc. v. McCutchen, 2013 WL 1567371 (2013), was a unanimous decision where the Court ruled that equitable principles (e.g., the Made Whole Doctrine and Common Fund Doctrine) cannot override the clear terms of an ERISA Plan requiring reimbursement.   If you have a Employee Retirement Income Security Act health insurance plan, you should consider this when resolving your case.

3. If you are not self-insured and you are health insurance is provided by a payor as defined by the Maryland code which I include for your convenience below, generally the subrogation amount is reduced by the same percentage as the attorney fees. In other words, if the payor is claiming $6000 as subrogation that $6000 would be reduced by the percentage attorneys fees (for arguments sake let's say the attorney receives one third of the award) that would reduce the subrogation claim to $4000. Sometimes a payor will argue that they are controlled by federal law which supersedes state law. As you can see this can get somewhat complicated. You should at least be aware of it.

What I find particularly interesting is that the payor has no obligation to advise you that you have the right to have the subrogation amount reduced. Look at the statute below and you will see that in Maryland, "no obligation to advise.-A payor has no obligation to advise an injured person or an attorney for the injured person of the injured person's right to reduction of the subrogation claim described..." In other words, the insurance company is legally allowed to hide the ball from you.

When choosing your personal injury attorney choose one who is aware of the various pitfalls that are part of the case.

Health Gen. Article Section 19-132 Defines Payor As Follows:

(m) Payor. -- "Payor" means:

(1) A health insurer or nonprofit health service plan that holds a certificate of authority and provides health insurance policies or contracts in the State in accordance with this article or the Insurance Article;

(2) A health maintenance organization that holds a certificate of authority in the State; or

(3) For the purposes of this Part III of this subtitle only, a person that is registered as an administrator under Title 8, Subtitle 3 of the Insurance Article.

Courts and Judicial Proceedings 11-112 addresses reduction in subrogation claims by the health insurance company. More specifically:

(a) "Payor" defined. -- In this section, "payor" has the same meaning stated in § 19-132 of the Health - General Article. 

(b) Applicability of section. --

(1) Except as provided in paragraph (2) of this subsection, this section applies to any right of subrogation under a contract or applicable law for payment of health care benefits or services for an injured person paid or payable by a payor or under any system of self-insurance or indemnification for health care expenses, if the amount of the subrogee's claim as determined under subsection (c) of this section is voluntarily paid by the injured person from the injured person's recovery in a claim for personal injury.

(2) This section does not apply to a voluntary reduction of a subrogation claim by a payor that exceeds the reduction of the subrogation claim described in subsection (c) of this section.

(c) Reduction related to attorney's fees incurred. --

(1) Unless a subrogee files a petition to intervene in the personal injury action and is independently represented by counsel, in a subrogation claim arising out of a claim for personal injury, the amount permitted to be recovered by a payor for health care benefits or services paid or payable on behalf of the injured person shall be reduced by the amount that is determined by:

(i) Subject to paragraph (2) of this subsection, dividing the amount of the total recovery in the claim for personal injury into the total amount of the attorney's fees incurred by the injured person for services rendered in connection with the injured person's claim; and

(ii) Multiplying the result under subparagraph (i) of this paragraph by the amount of the payor's subrogation claim.

(2) The percentage under paragraph (1)(i) of this subsection may not exceed one-third.

(d) No obligation to advise. -- A payor has no obligation to advise an injured person or an attorney for the injured person of the injured person's right to a reduction of the subrogation claim described in subsection (c) of this section.

(e) Certification regarding fees incurred. -- On written request by a payor, an injured person or an attorney for the injured person who demands a reduction of the subrogation claim described in subsection (c) of this section shall provide the payor with a certification by the injured person that states the amount of the attorney's fees incurred by the injured person for services rendered in connection with the injured person's claim.