Insurance Lawyer Blog

JP Morgan Chase’s Shady Flood Insurance Scheme for Borrowers

Thu, 17 May 2012 07:43:19 -0800

As San Francisco insurance attorneys we see how far greedy companies will go to try to squeeze more money out of their customers. And it is always gratifying to see people push back. As we tell our clients, often the only way to get these companies’ attention is through legal action. Otherwise insurance companies keep getting away with their strong arm tactics because they are so much more powerful and well funded than your average consumer.

A recent instance of this involves JP Morgan Chase and their mortgage lending policies. A class-action lawsuit was filed in the United States District Court for the Northern District of California, a federal court, earlier this month alleging nationwide abuse.

JP Morgan Chase makes its own determination as to whether borrowers need flood insurance—even if prior loan services on the same loan did not require it. If the company decides the homeowner needs flood insurance, it requests that the homeowner submit proof of insurance. If the homeowner does not provide such proof, JP Morgan Chase allegedly orders the insurance and charges it to the borrower’s escrow account.

Even more outrageous, the insurance company JP Morgan Chase uses in these scenarios is an affiliated brokerage entity in which the company has a financial interest. The lawsuit also alleges that JP Morgan Chase receives commissions, reinsurance kickbacks, and other benefits from this insurance company. Worse still, there is evidence that this flood insurance is sometimes completely unnecessary, is incredibly overpriced, and offers sub-par benefits. The premiums are as much as 10 times higher than the market rate for similar flood insurance and the coverage is inferior to comparable flood insurance, like that available through the National Flood Insurance Program.

The plaintiff in this case, Shelly Clements of Richmond, California, asserts that she bought a condo in 1999 and was not required to purchase flood insurance. She refinanced her mortgage in 2005 and was again not required to purchase flood insurance. It was only in 2010, after JP Morgan Chase had acquired her mortgage the year before due to the collapse of Washington Mutual that she was asked to provide proof of flood insurance on her condo. One month later, Ms. Clements claims she got a letter from JP Morgan Chase telling her such insurance had been placed on her property and that she was financially responsible for it.

The lawsuit is alleging breach of contract, not acting in good faith with its customers, and unjust enrichment. It calls the whole flood insurance process at JP Morgan Chase an ill-disguised “scam” to benefit the company through kickbacks and commissions at the expense of the hard-working homeowners trying to pay their mortgages in difficult economic times. It alleges that JP Morgan Chase also specifically chose to use substandard insurance coverage at exorbitant premium rates to further benefit themselves at the expense of their borrowers.

If you feel like you are being strong-armed or mistreated by your insurance provider, regardless of how you ended up with that provider, please contact a San Francisco or Oakland insurance attorney right away to discuss the problem.

See Our Related Blog Posts:

California Congressman introduces Flood Insurance for Farmers Act

California Flood Made Worse By Tricky Insurance Companies

Insurance Scammers Finally Go on Trial in Southern California

Fri, 11 May 2012 06:10:39 -0800

As San Francisco and Oakland insurance attorneys we pay attention to all insurance-related headlines. For example, almost decade ago there was a big news story about a massive, and twisted, insurance fraud scheme that crossed state borders. Four key players in that horrendous scheme are finally going to trial this week in a southern California courtroom to be held accountable for their crimes, which border on gruesome.

The New Times in Phoenix broke the story, and has continued to report on it. The story starts with fake totally healthy “patients” being recruited in Phoenix. They were hired for $800 to travel to Los Angeles and undergo completely unnecessary, and potentially dangerous, medical procedures. Many were not told about the side effects of these procedures, including one man who was struggling with the loss of strength in his hands, making it difficult for him to work. These included sweat-gland and sinus surgeries, colonoscopies, endoscopies, and gynecological and testicular procedures. The clinics that performed these operations would then bill the insurance companies at extremely high rates, and in this case the insurance companies asked few questions of the submitting doctors and organizations and paying out tens of millions of dollars in this massive fraud scheme. California officials estimate that 2,481 healthy “patients” went to California to undergo treatment from just one of the fake groups, Unity Outpatient, that was recruiting them.

The plan was that the patients would receive these huge reimbursement checks from the insurance companies and would turn them over, as they had already been paid their $800 fee. But some greedy “patients” saw the checks and cashed them instead of handing them over. One of Unity’s lawyers, himself deeply wrapped up in this scheme, actually sued the employees to get the fraudulently collected checks back! The whole mess unraveled from there. Roy Dickerson, that attorney, even claimed that they were being defamed at one point. Mr. Dickerson is no longer allowed to practice law and is one of the four main players about to go on trial in California.

The charges in this case of renting patients and harmful unnecessary surgeries include grand theft, conspiracy, insurance fraud (http://www.brodfirm.com/), filing false claims, and aggravated white-collar crime. Mr. Dickerson is additionally charged with money laundering, perjury, filing false tax returns, and failure to file tax returns. He also allegedly tried to transfer money around in a bid to hide their ill-gotten gains from federal investigators and prevent the victims from getting access to deserved restitution.

Some players have already been tried and convicted. Dr. William Hampton was sentenced to ten years in federal prison in 2008 and ordered to pay almost $2.5 million in restitution to patients on whom he performed unnecessary medical procedures. One of the original masterminds, Tam Vu Pham, is serving a 12 year sentence at the moment.

This kind of scheme is tragic and gruesome. However, it is a reminder that insurance fraud of various kinds happens all the time to many honest people. When it is one person against a huge company, the company often holds all the cards and tries to get away with wrongfully denying claims. If this has happened to you in our area, contact our Oakland or San Francisco insurance attorney to learn about your options.

See Our Related Blog Posts:

California Doctors Charged with Medicare Fraud in Nationwide Anti-Fraud Effort

MetLife Settles with States for Almost $500 Million

California Doctors Charged with Medicare Fraud in Nationwide Anti-Fraud Effort

Fri, 04 May 2012 07:19:41 -0800

Our San Francisco insurance attorneys know that for our older citizens, Medicare is an absolutely crucial health care program. That is why when Medicare insurance fraud occurs all seniors (and all taxpayers) are affected.

This week, authorities charged two Orange County doctors and six others in the Los Angeles area for participating in a $14 million fraud scheme against Medicare, according to news reports. US Attorney General Eric Holder and Health and Human Services (HHS) Secretary Kathleen Sebelius said that these arrests were part of a larger investigation nationwide against an alleged $452 million in false claims made against Medicare. Across the country, 107 individuals were arrested in seven cities, including, Los Angeles, Baton Rouge, Houston, Detroit, and Tampa. Mr. Holder said, "We are determined to bring to justice those who violate our laws and defraud the Medicare program for personal gain.”

The two Orange County doctors are Dr. Augustus Ohemeng of Buena Park and Dr. George Tarryk of Seal Beach. The two of them are charged with racking up nearly $5.7 million in false claims to Medicare. They allegedly wrote fraudulent prescriptions and also received kickbacks for referring the prescriptions to a medical supplies company. Two others arrested, George Samuel Laing and Emmanuel Chidueme, were arresting with them in this scheme. The four were arrested Wednesday morning and were to appear in court that afternoon.

In another California case, Bolademi Adetola of Harbor City and Yuri Martin Lopez of Lawndale were also charged with getting fraudulent prescriptions for Adetola’s company, Latay Medical Services. Latay allegedly submitted more than $8 million in bogus claims for power wheelchairs, orthotics, and hospital beds, which were either not provided or not medically necessary.

Two more California medical professionals were scheduled to turn themselves in over charges that Greatcare Home Health, a home health agency. The allegations are that Greatcare received more than $4.5 million from Medicare for services that were either never performed or were performed by unlicensed caregivers. More allegations of kickbacks for referring patients to Greatcare were also included.

HHS also suspended or took administrative action against 52 providers following a data-driven analysis and credible allegations of fraud. More than 500 law enforcement agents, including from the FBI, were involved in this huge takedown. In addition to the arrests, 20 search warrants were also executed.

Mr. Holder and Ms. Sebelius did not say how much of these fraudulent claims were actually paid out. But a review of 34 complaints and indictments found that authorities were seeking at least $59.5 million in ill-gotten gains.

Insurance fraud on these arge scales are damaging. But insurance issues affect local residents as well. Often the problems occur when an insurance company wrongfully denies a claim. If you or a loved one has been the victim of insurance fraud or claim denial , please contact our San Francisco and Oakland insurance claim attorney to get help with any legal issues.

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MetLife Settles with States for Almost $500 Million

Blue Shield Settles Rescission Lawsuit

MetLife Settles with States for Almost $500 Million

Fri, 27 Apr 2012 12:02:21 -0800

In another good news story, insurance giant MetLife, the largest life insurer in America, agreed to pay almost $500 million in a multi-state settlement deal after regulators reviewed whether companies were holding onto funds that should go to beneficiaries. This builds on a previous multi-state settlement with the US’s second biggest life insurer, Prudential, a few months ago (see blog post on that settlement here. Another settlement was reached with Toronto-based John Hancock.

With life insurance, the company is required to pay out the claim after receiving notification of the policyholder’s death and a valid death certificate. If there is no notification, then they are usually required to hold the funds until the policyholder would be 100 years old, plus an additional three to five years depending on the state, before turning the money over to the state as unclaimed property. The main allegation in these cases is that the insurance companies are not doing this, and are not taking the proper steps to track down beneficiaries, such as using Social Security databases to compare to their own records. MetLife maintains they pay more than 99 percent of life insurance claims and are working with regulators to ensure every claim gets paid.

An audit of MetLife launched in 2008 found that for two decades the company failed to pay benefits to beneficiaries or the state after a policyholder died. California Controller John Chiang said a joint investigative hearing with California Insurance Commissioner Dave Jones held last May revealed MetLife had information about the deaths of some of its life insurance policyholders but failed to pay what was owned. He went on to say, “These settlements make it clear that if the industry isn’t willing to make the payments legally required, we will take action, including lawsuits, to compel them to do right by their customers.”

As California insurance attorneys, we have been following these big investigations and multi-state settlements. States like California and Florida have led the way, with regulators scrutinizing these companies’ business practices. This most recent one with MetLife will likely see $40 million going to about 30,000 Californians, according to Mr. Chiang. The average cash value of each claim is about $1,200. Other states involved are Florida, Illinois, and Pennsylvania. MetLife also agreed to pay out about $188 million to beneficiaries across the country this year. Within the next 17 years is expected to pay as much as $438 million. Between the three companies that have settled, it is expected the combined payout will exceed $1 billion, although over several years.

Our San Francisco insurance attorneys know that these large multi-state settlements are a great step towards fairness for insurance consumers, especially by incentivizing these giant companies to behave correctly and follow fair, honest and transparent business practices. But these suits are not for individual policyholders who have been tricked or cheated by insurance companies. If a loved one has died, and you are unsure of whether there was a life insurance policy or what to do about it, contact an experienced insurance claim lawyer in San Francisco.

See Our Related Blog Posts:

Blue Shield Settles Rescission Lawsuit

Good news for California Life and Disability Insurance Consumers

Insurance Company Ordered to Pay Elderly Woman for Kicking Her Off her Health Plan

Tue, 17 Apr 2012 06:32:55 -0800

In a blow to insurance companies across the country, a unanimous Montana jury at the US District Court in Billings recently awarded 90 year old Arlene Hull a $34.3 million judgment against Ability Insurance Company of Omaha, Nebraska. It is one of the largest jury awards in Montana’s history, and amounted to $250,000 for breach of contract, $2 million for violating Montana’s Unfair Trade Practices law, and $32 million in punitive damages, according to the Billings Gazette.

In a story that is all too common to those of us who work in insurance law, Mrs. Hull and her husband purchased long-term care insurance in 1997 from a company then called Mutual Protective Insurance. Mr. Hull died in 1998, but Mrs. Hull continued to pay premiums. The company changed names and shifted ownership over the following years. In 2007, Mrs. Hull was diagnosed with Alzheimer’s disease and it became more difficult for her to care for herself. A year later, she moved into St. John’s Lutheran Home in Billings, when she began receiving benefits from her long-term care insurance policy. Ability Insurance bought the company holding Mrs. Hull’s policy in 2007 and decided to review her policy in January 2010. Ability decided to cut off Mrs. Hull’s benefits, and when her daughter appealed the decision, it was denied. Ability told them that then 88 year old Arlene Hull, diagnosed with Alzheimer’s for three years, did not need “continual supervision due to severe cognitive impairment” and that she was only “moderately” not “severely” impaired. In September 2010, Mrs. Hull and her daughter brought this lawsuit against Ability in the US District Court. The insurance company then reversed course and reinstated her benefits in October 2011, but the company refused to pay for the period she was without benefits.

Unfortunately, Montana law caps punitive damages at $10 million, so Mrs. Hull’s $32 million in damages from the judgment will not likely stand in an appeal. Regardless, this is a significant victory for insurance victims like Mrs. Hull. Her attorney said, “Long-term-care policy holders are responsible people who don’t want to be a burden to others and should not be wrongfully denied benefits under these policies.” Insurance companies need to understand that they cannot get away with these kinds of shady business practices, harming their hardworking customers by denying them deserved benefits to save the company money.
Cheating the vulnerable elderly happens all over the country, as our San Francisco bad faith insurance attorney (http://www.brodfirm.com/lawyer-attorney-1844610.html) discussed in a previous post about Dr. William Hall’s similar case in southern California. Without this recourse in law, seniors would be trapped by these greedy, unscrupulous insurance companies—duped out of their money and then left to suffer during the last years of their life, denied the care they paid for. If a loved member of your family is facing this kind of abuse over health insurance or long-term care insurance, please contact an San Francisco insurance attorney in your area as soon as possible.

See Our Related Blog Posts:

California Insurance Agent Gets Jail Time for Selling Annuity to Elderly Dementia Patient

Shameful Cheating of Seniors By Insurance Companies

New Ballot Initiative to Stop Rising Premiums in California

Wed, 11 Apr 2012 15:19:38 -0800

As always, our San Francisco insurance attorneys have their eye on insurance news. We are aware that perhaps the insurance that causes the most stress and worry is health insurance. No one wants to face a serious illness with no insurance or not enough coverage. And health insurance is something that everyone will have to use at some point in their lives, no matter how careful a person is.

Another cause of significant stress is how to pay for health insurance, since it is so critically important. Health insurance companies do not make this easy for consumers, jacking up premiums at every opportunity. Even by industry standards, though, the recent premium hikes have been extreme. Consumer Watchdog, a non-profit advocacy group focused on insurance issues, claims that California’s largest insurance companies have increased premiums 20 percent since April 1, and are set to increase another 20 percent on May 1. These higher rates will affect more than one million Californians. Californians are already struggling with these costs. Premiums have increased 153.5% since 2002, more than five times the rate of inflation.

To combat this problem, Consumer Watchdog has proposed a new ballot initiative for the upcoming election stopping these rising premiums. Currently, insurance regulators do not have authority to modify or deny rate increases. Last week California’s Insurance Commissioner Dave Jones called insurance giant Aetna’s rate hikes, which were as high as 21% for some customers, “unreasonable.” He told the Los Angeles Times that he supports this ballot initiative to give him power to modify or deny these outrageous rate hikes. "Like the recent unsustainable rate increases imposed by other health insurers on Californians," he said, "Aetna's rate increase proves again that we need to close the loophole in California law which denies the insurance commissioner the authority to reject excessive health insurance rate hikes." The Insurance Commissioner already has this power with regards to automobile, homeowners, and other types of property and casualty insurance.

The ballot initiative, if passed, would require insurance companies to disclose information about their rate increases. The companies would also have to justify these higher rates to the public and gain the approval of insurance regulators for their rate increases. Policyholders would have an opportunity to ask questions of the insurance companies and will be able to get more information, both from the companies and from the state regulators. As of last week, the organizers of this ballot initiative claimed to have 300,000 signatures in support of the initiative, out of 800,000 required to get the issue on the ballot in November.

This is a critical issue for this fall’s election. Our San Francisco insurance claim attorneys know this issue is also tied to the nightmare scenario of being denied a health insurance claim at the worst time possible. At that point, when time is of the essence, insurance companies will want to deny coverage for any little thing possible, one single missed or delayed payment, even while you struggle to have the money every month as the insurance costs more and more. If your health insurance company is trying to play this game with your health, contact our San Francisco insurance attorneys as soon as possible. And keep watching for news on this latest, and potentially beneficial, ballot initiative.

See Our Related Blog Posts:

National Health Care Insurance Debate and How it Affects California

California Health Insurance Report Card

Most Californians Don’t Have Earthquake Insurance

Fri, 06 Apr 2012 13:32:47 -0800

As San Francisco insurance claim attorneys we know that even when you have insurance coverage, sometimes it is a struggle to get money from claims. Insurance companies are run for profit, and the more claims they can reject for whatever reason they can find, fair or unfair, the more money will go towards their profits. This blog has covered what can happen to property owners when insurance companies use their tricks over fires, wind, and floods. But Californians also have earthquakes to contend with, and like flood insurance, most general homeowner’s insurance policies do not cover earthquake damage. Although a serious earthquake has not occurred recently, a 7.4 earthquake last month in Mexico should have people thinking about protecting their property. News sources have been speculating for the past few years about when California is due for the next “Big One” and how much damage it could do.

A recent article in the Orange County Register stated that 88 percent of private homeowners and 90 percent of business owners in California do not have earthquake insurance. This saves between $400 and $1200 in premiums a year. Earthquake insurance has become more expensive in the last decades after the Loma Prieta earthquake in 1989 and the Northridge quake in 1994. The Northridge quake caused an estimated $19 billion to $29 billion in damages and caused premiums and deductibles to rise. Since the devastating Northridge earthquake 17 years ago, the average Orange County homeowner has saved about $8500 to $17000, but that money will pale in comparison to the costs of rebuilding if another serious earthquake strikes. At that point, your deductible is basically 100 percent if you have no insurance. Also, many people are not aware of the fact that mortgage holders are still responsible for paying their mortgage even if their house is completely destroyed.
Many Californians could be in the terrible position of paying to rebuild their house while still paying a full mortgage.

Some expect the government will bail them out from a future theoretical earthquake disaster. But emergency government assistance is meant to get people back on their feet and make sure they are safe, not to rebuild their home or replace their lost property. Another consideration is that after an earthquake, there could be peripheral damage as well that would be covered under your homeowners policy but perhaps not if the cause of the damage is an earthquake. An example of this is if an earthquake causes a pipe to burst, flooding your house. You may have insurance that covers burst water pipes, but if the cause of the burst pipe was an earthquake you may not be covered.

California law does require insurance companies that sell residential insurance policies to offer a supplemental earthquake insurance plan to policyholders under California Insurance Code section 10081. Insurance companies are required to offer such coverage even if your building or house does not conform to the current Building Codes—although the company can charge an additional premium or higher deductable. A great place for resources on earthquake insurance regulations and California’s detailed insurance laws regarding this is the Department of Insurance’s earthquake insurance page for consumers.

If you are concerned about investing so much money into yet more insurance in a time of economic hardship with the worry that when the “Big One” comes the insurance company will cheat you out of your claim money, there are experienced California insurance attorneys that will be available to help you with your insurance case. In light of how severe the physical and financial damage can be, it seems time for Californians to at least consider how prepared we are for a future earthquake.

See Our Related Blog Posts:

California Takes Action Against AIG Subsidiary for Mishandling of Fire Claims

Wind Damage: Understanding Your Policy

National Health Care Insurance Debate and How it Affects California

Thu, 29 Mar 2012 11:22:33 -0800

As the entire country watches to see what happens with the Affordable Care Act (Obamacare) at the US Supreme Court this week, Californians have their own ideas about the future of California health insurance law. The most controversial part of the federal law is the “individual mandate” requiring people buy insurance. The law was supposed to bring 32 million more Americans into the health care system—four million in California alone. Just as in the country at large, Californians have very mixed feeling about the bill—strong supporters and opponents have been voicing their opinion of the measure.

Republican Assemblyman Tim Donnelly recently introduced a bill that he said would nullify the Affordable Care Act in California. Mr. Donnelly said his bill would amend the California Constitution to prohibit federal, state, or local law from forcing a person or business to buy health insurance or impose penalties if the person or business does not do so. The Assemblyman is essentially making the conservative case against this bill, similar to the case being made against it this week in Washington. Mr. Donnelly said, “The underlying principle is that deciding who you want to provide your health care or where you want to buy insurance or pay as you go ought to be left up to the individual. That's a personal decision.” The conservative justices on the Supreme Court seem to be agreeing with this line of reasoning, although no one will know for sure until the judgment is handed down sometime in June.

However, California was the first state to set up a health insurance exchange when it passed the Health Benefits Exchange, which was signed into law in 2010 and will be up and running in 2014. So even if the Affordable Care Act is struck down by the Supreme Court, Californians will still have access to affordable health insurance options. And health insurance costs will still be subsidized by the state government for low income consumers. Peter Lee, the executive director of the California insurance exchange, said that if the Affordable Care Act is struck down, California will lose federal subsidies for the exchange but that the state would press on regardless. Mr. Lee said, “We need to have resources to provide a way for consumers to make better choices and that support and interest will be there no matter what happens with the Supreme Court.”

California’s Secretary of Health and Human Services Diana Dooley said about federal subsidies,

My agenda is to use as much of that as possible, as quickly as possible, to be sure that California has a marketplace, even if we don't have the full promise of the ACA - The Affordable Care Act.” But California will have a hard time continuing the Affordable Care Acts programs to the level intended because so much federal money would be lost, and not only in terms of the insurance exchanges but also in other provisions of the law like expanding Medicaid.

Those interested in California insurance law and health insurance in general will be waiting to hear from the nine justices in Washington in a few months. Either way, it will surely affect Californians no matter what, even if the state tries to move forward with some provisions of the law. In any event, if you ever have issues or concerns with your insurance company in our area, be sure to get in touch with our Bay Area insurance lawyer to have support taking on big insurance interests.

See Our Related Blog Posts:

California Health Insurance Report Card

Health insurance for Small Business Owners

California Insurance Agent Gets Jail Time for Selling Annuity to Elderly Dementia Patient

Wed, 21 Mar 2012 12:33:09 -0800

This week, a California insurance agent, Glenn Neasham, was sentenced to 90 days in jail after being convicted of felony-theft by a jury for selling an annuity to an 83 year old woman with signs of dementia. As San Francisco insurance attorneys, we are always especially concerned about the vulnerable being preyed up on by unscrupulous insurance companies and agents. (see another post about the elderly here)

Hopefully this case sends a clear message that California will not tolerated this. When the insurance agent was arrested in 2010, then Insurance Commissioner Steve Poizner said agents “who steal from vulnerable seniors will not get away with their shameful tricks." Mr. Neasham may be the first insurance agent ever put behind bars for selling an annuity. His bail was set at $20,000 and needs to be posted by April 18 to be allowed to remain free while his appeal is pending, but Mr. Neasham, once earning $500,000 a year, claims to be “financially ruined” from this case.

Mr. Neasham claims that the elderly woman, Fran Schuber, came to him in 2008 with her octogenarian boyfriend, Louis Jochim, who had bought a similar annuity from him years before. The annuity he sold Ms. Schuber was an “indexed” annuity, meaning that it pays interest based on the performance of stocks and bonds. The buyer is guaranteed not to lose the money they put into it—the principle—but they face very steep penalties for withdrawing the money early, sometimes being required to keep their money in the annuity for more than a decade. The annuity was to be through Allianz SE. Mr. Neasham denies that he noticed any signs of dementia in Ms. Schuber at the meeting.

The criminal case started when Ms. Schuber and Mr. Jochim went to her bank to withdraw $175,000 to pay into the annuity. Bank officials noticed she was confused and notified California’s elderly protection officials as required under California law.

The prosecutor in this case stated that there was evidence at trial that Ms. Schubert, who was too ill at the time of trial to testify, was not competent to make this decision and that Mr. Neasham knew it at the time. She claimed that the 8 percent commission he was earning, which amounted to $14,000, played into his criminal intent. The California Department of Insurance also investigated this incident and determined that it was illegal.

At a 2007 meeting of the National Academy of Elder Law Attorneys, these indexed annuities were discussed and an experienced elder and insurance lawyer asserted that they are completely inappropriate for anyone over the age of 75, and possibly for younger people as well, because they defer payouts for such lengthy periods of time.

The Wall Street Journal noted that the conviction of Mr. Neasham was “sending shivers down the spines” of insurance agents across the country. Our California insurance attorneys think that insurance agents thinking twice before selling an annuity, or any kind of financial or insurance product, to an elderly customer is only a good thing. As Baby Boomers continue to retire, the industry needs to be more vigilant than ever.

See Our Related Blog Posts:

The Attorney’s Role in Negotiating Claims with Your Insurance Company

Shameful Cheating of Seniors By Insurance Companies

Claim Information Control Bill Proposed to Help Customers of Insolvent Insurers

Fri, 16 Mar 2012 08:01:34 -0800

As shown in recent blog postings, our San Francisco insurance attorneys follow all the relevant legal and political developments in insurance law, particularly as they affect Californians. This blog has covered potential changes to laws relating to automobile insurance, flood insurance, and insurance coverage for autism, to name a few. Another interesting development in California insurance law is Assembly Bill 1734 introduced by Assemblyman Curt Hagman in February.
This bill proposes to provide choices to policyholders when an insurance company becomes insolvent and is liquidated by the state. It also would, if enacted, provide the policyholders with information regarding their claims, the financial security of the company in liquidation, and the expected length and result of the liquidation. In general, liquidation of these companies and sorting out payment for claims and paying creditors can take a decade or more.

When an insurance company becomes insolvent, the Insurance Commissioner terminates the business by cancelling policies and not issuing or renewing policies. Then, if it is determined that the company cannot be rehabilitated or saved, the assets of the company are transferred to the California Department of Insurance’s Conservation and Liquidation Office (CLO) (http://www.caclo.org/perl/), which sells off the assets to pay policyholder claims and other creditors. The CLO operates as a fiduciary for the claimants until the assets are dispersed and the claims are paid. California also has the California Insurance Guarantee Association (CIGA) and the California Life and Health Insurance Guarantee Association (CLHIGA) to help meet the obligations of insolvent insurers through reviewing and paying claims. When a claim is either not covered by one of these organizations or it exceeds the maximum amount (except in worker’s comp cases, CIGA has a $500,000 limit), the CLO steps in with the proceeds from the asset sales.

As of February, the CLO was liquidating the assets of 22 “estates”, the term they use for a company in liquidation. Since 2000, the CLO has closed 59 estates, although not all estates have sufficient assets available to be able to pay claims, which are usually paid by CIGA or CLHIGA, but generally recovery will not be at 100 percent.

AB 1734 would allow policyholders to offer or restrict access to their claims so that other entities desiring to purchase their claim may contact them. This bill would, however, only apply to corporate claims and individual policyholder information would not be available. Assemblyman Hagman stated that this would allow companies to avoid the uncertainty of waiting to figure out if the insolvent company would ever be able to pay the claim. He said in a statement, “There is no reason they should be trapped in the purgatory of a government bureaucracy averaging 10 years to complete their task.”

However, Nicole Mahrt Ganley, spokeswoman for the Association of California Insurance Companies, said there are already laws in place to protect policyholders. She said her organization does not have a position on this new bill, but that California in general has a “very good” safety net with a guarantee fund to ensure policyholder protection in case of a bankruptcy.

In any event, if you have had trouble with an insurance company in San Francisco, Oakland, or any surrounding areas, please get in touch with our Bay Area insurance lawyers to see how we can help.

See Our Related Blog Posts:

Big Year Ahead For California Auto Insurance

California Congressman introduces Flood Insurance for Farmers Act

California Takes Action Against AIG Subsidiary for Mishandling of Fire Claims

Fri, 09 Mar 2012 06:11:59 -0800

As San Francisco insurance attorneys, we know one of the most devastating loses is one’s home. When something takes away a home, everything is upended and we need our insurance providers to come to our aide quickly so we can move on with our lives. Unfortunately, that is often when insurance companies stall and engage in unscrupulous and illegal behavior.

This week, California insurance regulators under the Department of Insurance have filed three actions against an American International Group Inc. (AIG) owned subsidiary company, New York based New Hampshire Insurance Co, over how it handled claims from that 2008 Sayre fires that devastated over 11,000 acres in the Los Angeles area in what has been dubbed the worst loss of homes due to fire in the city’s history. On that horrible November day, 600 structures were destroyed, leading the Mayor of Los Angeles and the Governor of California to declare a state of emergency. At the Oakridge Mobile Home Park alone 480 mobile homes were totally destroyed, and New Hampshire Insurance covered 370 of them with Mobile Homeowners Policies.

In the months after the Sayre fires, the Department of Insurance received numerous complaints about the insurance company’s handling of claims and investigated those complaints. The Department eventually cited New Hampshire and another subsidiary, York Risk Services Group Inc, with 125 violations of the California Insurance Code with unfair or deceptive claims practices in failing to diligently handle claims. Each of these violations, if substantiated, would have a civil penalty of $5,000 per act, raised to $10,000 if the act was willful. Department general counsel Adam M. Cole stated to reporters this week that, "We expect insurers and their agents to be thoroughly diligent in handling claims, especially at times of devastation such as the Sayre fire. The allegations in this case reflect a troubling lack of attention to consumer needs by New Hampshire Insurance Company."

The Department of Insurance said it had issued an Order to Show Cause, a statement of charges/ accusations, and a notice of monetary penalty against New Hampshire and its claims processing subsidiary. New Hampshire Insurance is planning to contest these citations in an administrative hearing, but parent company AIG has not made any statements with regard to this issue.

This is not the first time the Department of Insurance has had to step in with the AIG-owned subsidiary over the Sayre fires. In 2009, the Department acted on complaints by consumers over how much extended replacement cost coverage was available under New Hampshire’s policies. At that point, the Department was able to get between 110 and 125 percent of the fire insurance coverage for most policyholders, which was an increase of approximately $10.8 million.

While this is good news, waiting for government agencies to sort out complaints dealing with delayed claims and file actions a year or more after the disaster may not be sufficient for some homeowners cheated by their insurance companies. A qualified San Francisco insurance attorney will be in your corner and focus on you specific case and circumstances to help you get what you deserve as soon as possible.

See Our Related Blog Posts:

Wind Damage: Understanding Your Policy

California Flood Made Worse By Tricky Insurance Companies

The Attorney’s Role in Negotiating Claims with Your Insurance Company

Tue, 06 Mar 2012 15:56:11 -0800

A police car crashed into a San Francisco home on March 6 when it swerved to avoid a turning car and lost control. The two police officers occupying the vehicle were taken to the hospital with minor injuries. Meanwhile, the homeowner, Margarita Gomez, was inside when the officers crashed into the garage. According to SF Gate, Mrs. Gomez heard screeching outside and was bracing for the sounds of a collision, but instead was shocked by the noise of a car slamming into her home.

Luckily, no one in the house was injured. However, Mrs. Gomez must now wait for the insurance adjuster to come out and evaluate her claim for the extensive property damage. Claimants like Mrs. Gomez should keep in mind that the adjuster works for the insurance company and not for them. The insurance company has an incentive to resolve the claim as quickly as possible, which sounds good for claimants, but claimants’ desire to receive the claim money quickly makes them susceptible to pressure to accept a relatively low offer in order to move the claim along. Other common tactics reported by Hector Quiroga, J.D. include, calling at inconvenient times to rush the claimant and also assigning multiple agents to one case so that claimants must explain their position multiple times and leaving them with possibly incongruent answers. Agents may also take the value of the claim out of context by giving examples of what the claimant can buy with the money, instead of the discussing the actual value of the claim.

If you have submitted a claim to an insurance company, NOLO recommends approach any offers with caution. If another party is at fault you will likely be dealing with that party’s insurance company In that case, you may have to argue who the other party’s liability for the damage and whether you contributed to the accident, on top of the actual dollar amount of damages. Before accepting any insurance offers over the phone, you should hang up and think over the offer and whether it really covers the damages and other hidden costs you incurred. If injuries were involved, you should roughly calculate past and future lost wages and pain and suffering. If the claim is unacceptable, but the insurance company is unyielding or using questionable tactics, you might want to consult an attorney to negotiate with the insurance company for you.

Big Year Ahead For California Auto Insurance

Fri, 02 Mar 2012 13:59:52 -0800

It is not possible to turn on the TV these days without hearing endless news of the 2012 election. The presidential race has consumed most media focus, but here in California, there are other important issues that will be on the ballot in November. Among them is the 2012 Automobile Insurance Discount Act, proposed by the American Agents Alliance and supported by the billionaire chairman of Mercury Insurance George Joseph, to the tune of $8 million.

As a California insurance attorney, I see some potential issues with this Act. The changes in the so-called “persistency discount” might be helpful to some consumers. Right now, a driver generally gets a discount for having and keeping auto insurance, but if a driver switches insurance companies, that discount for maintaining insurance is lost. This Act would allow the driver to keep the discount for maintaining insurance even if he or she switches insurance companies, which supporters of this Act say is a good thing for responsible drivers.

However, the darker side to this Act is that it would also allow insurance companies to raise rates for a driver who has not kept continuous coverage. That is common in other states, but has been illegal in California since 1988. Critics say this proposal will hurt consumers who don’t own a car or use public transportation, despite being good drivers. Critics, particularly Consumer Watchdog, point to similarities in a failed ballot initiative from the 2010 election, Proposition 17. That proposed act was directly supported by Mercury Insurance and failed narrowly, 52% - 48%. One major stumbling block to Proposition 17 was that it made no provision for military personnel who are often deployed for a year or more. This 2012 Act remedies that with special provisions for the military.

The defeat of the similar proposition in 2010 was so narrow that those of us deeply involved in California’s insurance industry will be interested to see how the argument over the 2012 Automobile Insurance Discount Act will ultimately shake out. It promises to be another bitter battle in what is already shaping up to be a contentious election cycle all around. Already in December, the Insurance Journal reported that Consumer Watchdog accused Mercury Insurance of raising rates to pass on the cost of political campaigning on this issue to the consumer. At the end of last year, Mercury requested permission from the California Department of Insurance for a six percent rate hike for automobile insurance. Mercury denies this has anything to do with political campaigning. But millions were spent to support the failed 2010 Proposition 17. The company claims those costs are born by the shareholders, not consumers, and the rate increases are to cover rising costs. Under California law, insurance companies must deduct the cost of political campaign and lobbying expenses from the administrative costs they pass on to consumers. Mr. Joseph stated that a separate holding corporation, Mercury General, paid for the Proposition 17 campaign and the insurance company itself contributed no money. But that holding company should still have reported the expense, which as of December it had not done, as required by California law.

It is not surprising that the auto insurance industry might have skirted rules in order to pad its bottom line. If you are ever feel like you have been taken advantaged of by a local insurance company, please get in touch with our San Francisco insurance lawyer to see how we can help.

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California Health Insurance Report Card

Fri, 24 Feb 2012 09:47:16 -0800

The California Office of the Patient Advocate, created to inform and educate Californians on their HMOs and health insurance providers, released an annual Health Care Quality Report Card (http://www.opa.ca.gov/report_card/) this week detailing the scores for California’s nine largest health management organizations, six largest preferred provider organizations, and 212 medical groups representing 16 million consumers with private health plans. In general, it seemed California consumers were satisfied, but the report highlighted the need to improve treatment for lung disease, attention-deficit disorder, and throat infections in children. Additionally, more than a third of health insurance consumers stated they had problems with how the insurance organizations dealt with complaints.

This year’s report card also stated that the California providers exceeded the national average in terms of diabetes care and controlling high blood pressure and cholesterol, but scored lower on heart attack medications, flu shots for adults, and providing treatment for alcohol and drug abuse. Insurance consumers also complained about the difficulty getting cost estimates for medical procedures and figuring how much their insurance will pay for, as well as paying for the claims correctly.

Each plan is ranked in categories of care between one and four stars, depending on meeting national standards and membership ratings on things like getting appointments and customer service. The only HMO to receive an overall four start rating was Kaiser Permanente, but even they had troubled areas. Kaiser only received two stars for ease of making appointments and treatments, especially with specialists. And in northern California, it only received one star for plan service, which includes processing of claims. Overall, fourteen of the fifteen health plans rated scored only a one or two star rating out of four stars in customer service, which includes questions about costs and claims. Among the preferred provider organizations (PPOs), none of the six received the highest four star rating. Only three, Aetna, Cigna, and UnitedHealth were ranked as three stars, or good.

The annual report card is now in its eleventh year and this edition covers data and information collected from the year 2010. The director of the Office of the Patient Advocate, Sandra Perez, stated at a press conference that the public report card is to keep insurance providers accountable and to encourage quality improvements in health insurance policies. She also said they will continue to go forward with health care reform in California—more focus will be on the quality and value of health care. Californians can research medical groups by either name or county. As San Francisco insurance claim attorneys, we encourage our clients and insurance consumers to check out the report card to assist in comparing and contrasting different insurance providers and plans to make the best choice possible. These public reports are one way to keep insurance providers honest, and are a valuable tool in California, but if you are having serious problems with your insurance provider not providing the services or care required in our area, it is still advisable to discuss the problem with a San Francisco insurance lawyer.

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(Photo Courtesy of Dave Dugdale)

California Congressman introduces Flood Insurance for Farmers Act

Fri, 17 Feb 2012 08:54:10 -0800

Our San Francisco insurance attorneys are always interested in developments in insurance laws around the country and in particular as they affect California. This week California Congressman John Garamendi introduced H.R. 4020 into the House of Representatives, called the Flood Insurance Farmers Act of 2012. The bill addresses the cost of insurance for farmers who grow crops and livestock on floodplains.

Many existing levees that protect agricultural land have recently been downgraded by a study of the Army Corps of Engineers and the Federal Emergency Management Agency (FEMA). Large amounts of US farmland are being designated as flood areas if the levees in those areas are not found to give 100 year protection. This would require property owners in these areas to purchase flood insurance, pay higher rates, and all new construction or improvements would have to meet stricter building requirements. In many of these areas, flood insurance is not available and farmers would not be able to improve or build new agricultural structures necessary to support or grow their business.

FEMA determined that California is the first state to have its floodplains and levees studied and mapped. Some affected California farmers are saying these restrictions on floodplains could make now productive agricultural communities disappear. The first new designations and maps released by FEMA put almost all of Sutter County in a “Special Flood Hazard Area.” Rural residents there say the level of flood insurance and certification required now is cost prohibitive and unattainable for most farmers. It could shut them down. They will be prohibited from making improvements worth more than 50 percent of the structure’s value. And anyone with a federally backed mortgage will automatically be required to purchase flood insurance, which will increase insurance costs for that property by four to six percent.

The bill introduced by Congressman Garamendi, who was California’s Insurance Commissioner from 1991 to 1995 and is also a lifelong rancher, proposes insurance subsidies for farmers in these areas, a study of the costs of insurance in these areas, (particularly in California where large premiums are required but little is paid out in return) and a provision to make sure flood insurance is available to property owners in these areas.

Congressman Garamendi notes that Californian farmers are particularly affected by the recent downgrades. He states that it has placed huge portions of California’s agricultural land at a disadvantage. The Congressman also notes that many of the levees in question have never been breached, and some have been in place for more than 100 years. He also notes that California is a net donor to the rest of the nation on flood insurance, because Californians have received only a 20 percent payoff from the floods that have occurred in California.

The Flood Insurance Farmers Act seems to have fairly wide bi-partisan support in the House, but it still has to go through the process and determinations must be made about the cost of the insurance and actuarial implications. Our California insurance lawyer knows this is a serious concern for many rural Californians, and we will be watching to see how the bill progresses.

See Our Related Blog Posts:

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California Flood Made Worse By Tricky Insurance Companies