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Michigan Long Term Disability Insurance Lawyer Blog

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This Blog is normally devoted to issues surrounding long term disability insurance and other related issues. However, in case you haven’t noticed we have an election just around the corner and I want to try to provide some information to the public about the state of the law in Michigan and in particular how one judge up for reelection has affected the legal landscape. I hope to post new enties regularly as we approach election day.

Michigan Supreme Court Justice Cliff Taylor, who is up for reelection, has repeatedly turned the law on its head to the benefit of insurance companies and big business at the expense of the average Michigan citizen. Following is one example.

JUSTICE TAYLOR EVISCERATES ENVIRONMENTAL LAWS

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Farmer’s Insurance was recently hit with a $130,000,000.00 jury verdict in a class action law suit filed on behalf of a group of 76,000 Oklahomans. The plaintiff’s were Farmer’s customers in Oklahoma who made claims from June 1994 through mid-2007. The homeowners claim that Farmers, a subsidiary in Los Angeles of Zurich Financial Services AG, deliberately underpaid their claims.

The suit apprently was originally brought by a single policyholder Bill Burgess who sued Farmers in 2001 over a policy on his home. Mr. Burgess felt he had been underpaid on his claim for wind and storm damage. The lawsuit was changed to a class action after lawyers found information in the insurer’s claim files indicating that denying payment for overhead and profits was a “widespread practice,” plaintiff’s attorney said.

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Insurer-AIG has sunk to a whole new level.

Iraqi war veteran Andrew White returned from Iraq after spending two years protecting American Soldiers by removing IED’s. His brother was not so fortunate-He was killed in combat.

So Andrew decided to take out a life insurance policy naming his parents as the beneficiaries when he saw the financial hardship related to his brother’s death. AIG was happy to issue him a life insurance policy and accept his premiums (which it increased because he was a smoker).

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I hate to pick on Allstate again, but they have really had some big problems lately.

The much maligned insurer, Allstate, recently agreed to a 28.5% rate reduction for all of its California residents. Apparently, in order to avoid the potential of having to pay a huge amount in refunds to its customers, Allstate agreed to the rate reduction.

According to the LA times article, a number of Allstate’s customers were still angry despite the rate reduction because they have been paying too much for too long. Apparently, the rate cut is worth about $250,000,000 million dollars for the consumers.

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Allstate recently settled a bad faith lawsuit where it had been held in contempt of court for refusing to produce documents pursuant to a court order. Allstate began racking up $25,000 in fines per day when it refused to follow the Judge’s order to produce the documents.

Apparently, Plaintiff sought internal Allstate documents supposedly showing how the company set up a claims payment system in the 1990s that low-balled clients and allowed Allstate to make huge profits.

Because a confidential settlement was reached it is not clear how much of the $7,000,000 fines were actually paid. Allstate claims that it was appalled when it learned last year that it was being threatened with contempt. Once again, one wonders how Allstate is able to operate in this manner and remain profitable.

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A Louisiana court recently rejected a long term disability insurer’s attempts to hide behind the protections afforded insurance companies by ERISA. In Gulf Coast Plastic Surgery v Standard Insurance Co. the Court determined that a claim that the insurance agent failed to increase the policy limits despite the doctors request and the agent’s promise was not preempted by ERISA. Rather, it was a simple negligence claim, even though it involved an ERISA policy.

The Court found that the claims against Hillyer(the insurance agent) were not subject to preemption under ERISA, because they did not implicate a relationship governed by ERISA and because the resolution of the claims does not require interpreting an ERISA plan. THe insurance agent was not an ERISA fiduciary, and the resolution of such allegations did not require the interpretation of an ERISA plan.

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Another bad faith verdict against Allstate is upheld by the Missouri Court of Appeals reported the Kansas City Star. This time it looks like it is going to cost Allstate a cool sixteen million dollars. Apparently, Allstate failed to respond to a demand in a case where its insured caused a head on collision leaving the two claimants in the hospital for 35 and 40 days respectively.

According to the article Allstate first tried to argue that it never received the demand. When that didn’t work Allstate tried to argue that it wasn’t sure that the crash had actually casued the injuries. Neither the jury nor the Court of Appeals was buying that story. I am not sure, but maybe because the claimants had to be cut out of the wreckage and were flown by helicopter to the hospital and received intensive care.

It certainly makes this writer wonder just how much money Allstate has that it can get hit in the pocketbook like this and keep doing what it is doing. Maybe Allstate is spending all its money on those commercials with that distinguished looking actor trying to convince everyone that “you are in good hands” instead of settling meritorious cases?

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At least they weren’t ranked as the worst insurance company for consumers. (That award goes to Allstate.) Long Term Disability Insurer-Unum was ranked second from worst in a recent study cited by the SunHerald.com. Despite agreeing to pay a massive fine and review thousands of its Long Term Disability claims decisions in a Multi-State Regulatory Settlement Agreement, Unum was still ranked near the absolute bottom of insurers.

According to the article Unum earned a profit in 2007 of more than 679 million dollars while paying its CEO a whopping 7.3 million dollars. Unum was joined in the study by Allstate, AIG, State Farm and Conseco as the most anti-consumer insurance companies in the U.S.

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A recent Court decision applying the ERISA statute determined that a beneficiaries claim for life insurance benefits must be dismissed.

Melissa Amschwand and her husband-Thomas did everything they were told to maintain Tom’s life insurance when he was diagnosed with terminal cancer. After he died and his widow applied for his life insurance benefits they were told for the first time that Tom needed to have worked a single day in order to trigger his life insurance benefits. What is really egregious is that prior to his death, Tom and his wife repeatedly asked for a copy of the policy to make sure that he was covered. The company never provided the requested information. In fact, the company repeatedly assured Tom and Melissa over the phone that he was covered.

After he died, the company dropped the bomb on Melissa that Tom had failed to satsify the “Active Work Rule” which required that Tom work a single day to trigger the life insurance policy. Instead of paying the life insurance benefit of over $400,000 the company merely refunded the life insurance premium amount.

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Colorada recently passed a law banning the use of discretionary clauses in any Long Term Disability insurance policy. This ban also applies to group policies. Colorado’s new law reflects the same policy decision of the Michigan Insurance Commissioner.

Banning these discretionary clauses, and requiring that a court review the claim on a “de novo” basis means that the court must perform its own review and decide whether the administrator’s decision was right or wrong, with absolutely no deference given. This will, in all likelihood, have a huge effect on the number of viable Long Term Disability claims in Colorado.

Thanks to Attorney Shawn McDermott for his blog on this subject.

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