California Insurance Lawyer Blog

Suit Seeks More Than $1 Billion in Damages

The Los Angeles Times reports that in a lawsuit filed July 16, Los Angeles City Attorney Rocky Delgadillo has accused health insurer Blue Shield of using complex and confusing applications to trick consumers into making allegedly false written statements the insurer can use against them in rescinding coverage. (“Blue Shield Sued for Allegedly Lying About Its Coverage”)

The suit alleges the insurer cancels coverage when insureds are ill and facing substantial healthcare costs. Blue Shield may have to pay more than $1 billion in fines and penalties. A similar recent lawsuit against Athem Blue Shield forced the California Department of Managed Health Care to review more than 2000 rescission cases to determine if the cancellations occurred after the policyholders became ill.

The article quoted Dr. Richard Frankenstein, president of the California Medical Assn. “Having health insurance does not mean you will receive healthcare when you need it,” he said. “Insurance companies promise you the moon and a thousand doctors, but if you really need your medical care you can bet they will be looking for a way to deny treatment or cancel your policy.”

We’ve been saying that all along, and its rewarding to know that the head of California’s medical community agrees with us.

Delgadillo’s attempts to keep health insurance carriers honest are praiseworthy, and we hope it is motivated by more than political aspirations. Ending this harmful rescission practice is a huge undertaking, however, and will require more than participation than just one California city attorney’s office. We urge the legal, medical and regulatory communities to get behind these efforts, and we challenge the state legislature to take note and begin to legislate accordingly.

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Posted In: Health Insurance , Insurance Bad Faith

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A report this month compiled by the American Association for Justice documents what most of us already know: Some of the county’s top insurance companies consistently place their own financial interest above the interests of their policyholders and raise premiums, delay claims and deny coverage. For "The Ten Worst Insurance Companies in America, see, www.justice.org/docs/TenWorstInsuranceCompanies.pdf.

Although Allstate stood out as number one because of its shameless mission statement “to earn a return for our shareholders,” our old nemesis Unum ranked number two. Conseco, another insurer we regularly battle on behalf of policyholders, ranked number five.

On page one of the report is this telling statement: “The insurance industry has so much excess cash, it may spark a downturn in the industry.” How did the industry amass such wealth? According to the report “the name of the game is deny, delay, defend – do anything, in fact, to avoid paying claims.”

Take disability insurer Unum, for example, which paid it CEO $7.3 million in 2007, raked in $679 million that same year, and has assets of $52.4 billion. Debra Potter sold Unum disability policies for many years as part of financial services packages. She bought one herself. She developed multiple sclerosis and filed a claim for benefits. Unum denied the claim, alleging the disease was “self-reported,” a euphemism for “fraudulent.” Potter’s physicians supplied letters and memos validating her illness. Unum continued to deny the claim for three more years. Potter hired a lawyer. Only then did Unum eventually pay Potter’s disability benefits.

We see this every day. It doesn’t matter the disease and, sadly, it’s beginning to infect the entire industry as more carriers realize what insurers such as Allstate and Unum are able to get away with until regulators step in and administer what many times is little more than a slap on the wrist.

The insurance industry is sitting on mountains of gold accumulated from policyholder premiums. Understandably, the carriers have a duty to their shareholder’s to protect assets from fraudulent claims. But, the carriers go way beyond that objective and deny valid claims every day knowing that the fewer claims they pay, the higher their profits will be. Nothing in the AAJ report shocked us. In fact, we would have been surprised had the report reached any other conclusion. But don’t expect the insurance industry to show any shame. They’ll deny and delay as always, and continue business as usual until laws are changed to prevent such conduct.

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Posted In: ERISA , Health Insurance , Insurance Bad Faith , LongTerm Disability (LTD) Insurance

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This question comes up all the time, so we thought we'd discuss it.

Although it is a relatively straightforward question, the answer is not so straightforward. In short, it depends.

First, it is both to your benefit and to the benefit of the insurance company or employer paying your LTD claim that you receive SSDI Benefits. In every group policy I have ever seen, your LTD benefit will be reduced by the amount you originally receive from SSDI, so the insurance company is very happy to have Social Security pay what is often a high percentage of your claim. That is why it benefits the insurance carrier.

It also benefits you to obtain SSDI, in that after being receiving benefits for 24 months, you will be entitled to receive Medicare, which may be your only avenue to obtain health coverage. Also, the carriers will not offset any increases you receive from Social Security due to Cost of Living Allowances.

It is also to your benefit to have obtained SSDI, as the very recent U.S. Supreme Court decision in Glenn v. MetLife provides that insurance companies must consider the fact that Social Security has granted you benefits when they are considering whether or not to pay your claim.

So, getting SSDI is a good thing, but that doesn’t answer the question whether you should allow the insurance carrier to assist you.

First, having the insurance company obtain a representative for you, or hiring one yourself, will not save you money, or cost you money. Social Security lawyers can only charge you if they win, and if they do, the insurance companies almost universally offset only the amount you receive after the lawyer has been paid. So, the cost of the Social Security lawyer/representative is not relevant to your decision.

Second, you have to consider if the lawyer hired by the insurance company can help you get SSDI benefits, but at the same time harm your ability to continue to receive LTD benefits. The answer to this question may decide the issue for you. SSDI has no limitations on the time it will pay for disabling conditions, which is not the case with most group LTD Plans. The LTD Plans often have 24 month limitations for Mental & Nervous Conditions, and/or Substance Abuse. Suppose someone has Fibromyalgia with secondary depression. A representative hired by the insurance carrier may well push Social Security to award you benefits based on the depression, knowing that the insurance company will be able to turn around and use the award of SSDI benefits to limit your LTD claim to 24 months. Will the SSDI representative actually do that? No one knows for sure, but I have seen instances wherein I certainly believed it happened. Based on the foregoing, if there is any aspect to your disability which could be classified in such a way as to limit your ability to continue to receive LTD benefits, the safer approach is to retain your own representative who will be serving the interests of only one party, YOU!

In my opinion there is only one reason to even consider letting the insurance company retain someone to help you get SSDI. That reason is, if the insurance company is willing to hire someone to convince Social Security that you are totally disabled under the governments very strict standards, it will be more difficult for the same insurance company to turn around and deny your LTD claim. However, the mere offer by the insurance company to hire someone for you is probably strong enough evidence of your disability to outweigh the disadvantages of allowing the insurance company the ability to control your SSDI claim.

If you need assistance in getting your SSDI benefits, contact NOSSCR, which is the National Organization of Social Security Claimants Representatives. The organization, will, without charge, find someone in your geographic area qualified to help you.

Finally, if you think the advice offered in this blog is biased because I am looking for business, I am not a member of NOSSCR, and do not EVER represent claimants seeking to obtain SSDI benefits. However, I have seen scores of cases where the choice of a Social Security representative has impacted a client’s ongoing claim for LTD benefits. GK

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Posted In: LongTerm Disability (LTD) Insurance

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