August 19, 2017

Litigation Consulting

 

Recently, I was asked by an attorney to serve as a health insurance bad faith consultant and bad faith expert witness. I was to review an insurer's handling of a member's claims and the level to which this handling conformed to acceptable medical claims processing practices and whether the insurer breached its duty of good faith and fair dealing through some motive of self-interest or ill will. Here is that report which resulted in a very favorable settlement for the plaintiff. Meanwhile, an overview of the current state of this fascinating legal arena:
 

How to Sue a Health Insurance Company

If you’re involved in a dispute with your health insurance company, filing a lawsuit will not usually be your first step in the dispute. Instead, you must first go through several formal procedures to address the insurance dispute out-of-court. If all else fails, and no resolution is achieved, it may be necessary to seek justice in the courtroom.

Pre-Litigation Forms of Resolution

  • A first internal review with insurance company
  • A second internal review with insurance company 
  • An independent, or the so-called "external review"

 

Prior to filing a lawsuit, you should go through the following process to appeal a health insurance decision:

Bringing a Lawsuit against Your Health Insurance Company

If the external review results in an unsatisfactory decision, you can bring a formal lawsuit. Whether you’ll be able to do so depends on your insurance plan and your state’s laws. Seeking advice from a qualified attorney is necessary at this time.

Before consulting with an attorney, you should have in your possession:

  1. Your healthy insurance policy
  2. A written log of your communications with your insurance company
  3. The documents of the insurance company’s denials of your claim
  4. A comprehensive set of documents received during the internal and external review processes

There are several key points that you should keep in mind in order to have a strong chance of winning a lawsuit or obtaining a satisfactory settlement:

  • Your insurance may send you back your premiums with other documents that may ask for a release. However, DO NOT sign anything. After a lawsuit is filed, all communications from your insurance must be reviewed by your attorney.
  • Make sure you understand the bad faith insurance laws of your state and hire a qualified lawyer who specializes in these laws.
  • Typically, bad faith insurance lawsuits involve contingency fee payments, so that you only pay a lawyer when you win or settle the case.

Insights and Precautions for Suing Your Insurance Company

A claim filed in court is likely to be that of a "bad faith insurance" claim. Such a clam against your insurance company may result from your insurance company’s:

  • Failure to respond to your claim in a timely manner
  • Declining a claim or refusing to settle
  • Failure to investigate

In a bad faith insurance claim, your insurance company must prove that it acted appropriately. In another words, the insurance company has the burden of proving its innocence This is because threlationship between an insurance company and its policy holder is unique unlike the relationship between parties to other types of contracts. Policy holders purchase a company’s promise to pay in the event of a covered loss and that this promise to pay will be honored in good faith since the policyholder cannot replace the company’s duty to pay on the open market if the company breaches the agreement. In this way, a fiduciary relationship is created between the company and the policy holder.

Every insurance company has its own written and unwritten practices and guidelines because they all have differently structured coverage schemes. However, all companies must follow what are minimal and basic claims procedures that allow payment of claims covered by a policy which is the result of a fair and honest assessment of any coverage questions in light of policy language. All insurance contracts contain a covenant of good faith and fair dealing. The claims department must honor the company’s obligations under this implied covenant. The insurance company may not place its interest above that of the insured. The task of the insurance coverage is to seek coverage for its insured under the terms of the policy and not to seek coverage controversies or ambiguities to deny or dispute coverage. This is not an adversarial process. The company should assist the policy holder with the claim and must disclose to its insured all benefits and coverage under the policy. A company may not deny a claim based upon insufficient information, speculation or biased information. Insurance companies should pay claims unless there is a good reason not to pay the claim.

Further, when a policy holder submits a claim for payment of a medical expense either by himself or through the medical provider, the insurance company is duty bound to use all available information that becomes known to it in processing the claim and approach the claim presuming that it is covered but reviews all information available that may indicate it is not covered. The insurance company should have a system and protocol by which all the correct information can be obtained.  

Bad Faith Litigation Today 

For a period in the early 2000s, it appeared that civil juries might provide a significant and necessary check on the power of managed care companies, as juries returned a series of substantial verdicts against health insurance companies that had wrongfully denied care. But a series of decisions from the United States Courts of Appeals and the United States Supreme Court firmly established the proposition that whenever one has health insurance coverage through their employer, claims for compensatory and punitive damages are almost invariably foreclosed by the Employee Retirement Income Security Act of 1974 (“ERISA”). This rule applies no matter how outrageous the managed care company’s misconduct, and no matter how grievous the injury. While there are exceptions to the scope of ERISA – most notably individual plans and government plans – the overwhelming majority of Americans receive health insurance coverage through employers (either their own or a family member’s), and ERISA preemption forecloses any meaningful relief. After these preemption decisions, bad faith cases against health insurance companies almost entirely disappeared from the landscape.


The Affordable Care Act is changing that. Many citizens are purchasing health insurance policies through the federal health insurance marketplace – 318,000 as of last count, and almost certainly growing. These policies are not subject to ERISA preemption because they are not obtained through employment. This is an important development for anyone who believes that ordinary citizens should have full access to the courts, and for anyone who believes that corporate entities entrusted with the lives and the health of Pennsylvania families should have the same rights and responsibilities as anyone else, without special protections or special treatment.

At the same time, health insurance companies are required to comply with a number of patient protection requirements that are part of, or incorporated into, the ACA. For example, virtually all health plans are now required to comply with the Mental Health Parity and Addiction Equity Act of 2008, a law that bars discrimination against those with behavioral health conditions and substance use disorders. The ACA also requires health insurance plans to comply with detailed rules regarding internal and external appeals. The managed care industry’s compliance with these legal requirements has been, on the whole, grudging and incomplete. Because violations of legal and regulatory requirements are evidence of bad faith (if not bad faith in their own right), the possible availability of a bad faith remedy needs to be considered any time a managed care company has failed to follow these requirements.

Medicaid expansion could further expand the number of citizens who have health insurance that is not subject to ERISA preemption, because Governor Corbett’s plan for Medicaid expansion is built around private health insurance for many newly eligible Medicaid participants. That health insurance will not be subject to ERISA preemption.

Health insurance bad faith cases will always be challenging, because a plaintiff has to both win a malpractice case and prevail in the procedurally complicated area of health insurance law. And there are legal hurdles separate and apart from ERISA, including the Superior Court’s decision in DiGregorio v. Keystone Health Plan East, 840 A.2d 361 (Pa. Super. 2003), which stated (erroneously in my view) that bad faith cases against HMO’s are preempted by the HMO Act, 40 Pa. Stat. § 15601 But DiGregorio immunity does not apply to PPO’s, does not apply to common law causes of action, and does not apply to the carve-out behavioral health contractors that often control the care of the most vulnerable patients. On the whole these challenges are not in the same league as the categorical pall that ERISA used to cast over almost all of these cases.

These cases can be worth pursuing. Every juror understands that we will all, in one way or another, be at the mercy of a managed care company at some point in our lives, and juries are ready to tell these powerful businesses just what someone’s life and health are worth