Fallyn B. Cavalieri

All articles by Fallyn B. Cavalieri

 

Seventh Circuit: No Insurable Interest, No Problem (For the Beneficiary, That Is!)

The Seventh Circuit recently affirmed a district court decision upholding payment under a life insurance policy purchased by a securities intermediary. The decision first addressed the common law’s prohibition on wagering contracts, or stranger-originated life insurance, and the traditional remedy which invalidates any such policy of insurance. However, this case was subject to Wisconsin law, whose legislature places the risk on the insurer for issuing a policy to someone without an insurable interest by refusing to invalidate such contracts. Specifically,
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GAO’s Update on ACA Enrollment Process: CMS Encouraged to Take Steps to Monitor Program Cost, Risk, and Performance

The issue of fraud is still alive and well with respect to the health care exchanges established by the Affordable Care Act (ACA). The Government Accountability Office (GAO) recently issued a new update with respect to fraud in the federal exchanges. In that report, the GAO recommended that the Center for Medicaid and Medicare Services (CMS) strengthen enrollment controls and manage Fraud Risk. The report notes that implementation of the new eligibility and enrollment provisions for the first year was
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A Supreme Lesson on Diligence and Equity: Court Bars Recovery of Equitable Lien Under ERISA Plan

The Supreme Court issued its decision in Montanile v. Board of Trustees of National Elevator Industry Health Benefit Plan , holding that the fiduciary could not enforce its equitable lien against general assets. The court reversed the Eleventh Circuit, finding that where a plan participant has obtained a settlement from a third party — but has dissipated the settlement on nontraceable items — the fiduciary cannot bring a suit under Section 502(a)(3) to attach the general assets of the participant
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Sixth Circuit: SPD is Binding Plan Document, Subrogation Clause Enforceable

The central question in this appeal before the Sixth Circuit was whether the summary plan description (SPD) — the only document in the record that contained a subrogation provision — was a binding plan document with enforceable terms. In this case, Bd. of Trs. v. Moore, U.S. Ct. Apps., Sixth Cir., Aug. 25, 2015, there was a Trust Agreement that authorized the Board of Trustees to adopt a written welfare benefits plan, to administer the plan, and to act as plan fiduciary. Central
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GAO Statement Highlights Deficiencies in Federal Exchange Enrollment Process

On July 16, 2015, the Government Accountability Office issued a written statement entitled “Patient Protection and Affordable Care Act: Observations of 18 Undercover Tests of Enrollment Controls for Health-Care Coverage and Consumer Subsidies Provided under the Act.” This statement contained the findings of “undercover testing of the [Exchange] application, enrollment, and eligibility verification controls using 18 fictitious identities” that GAO submitted or attempted to submit through the Exchange in several states in a variety of ways. Testing began in January
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Timing is Everything: Beneficiary Change Made During Divorce Action in Violation of NY’s Automatic Orders Ineffective

Reliastar Life Ins. Co. of New York v. Cristando, N.Y. App. Div., 2d Dept., June 3, 2015 Under New York law, while the designation of an ex-spouse beneficiary will be subject to automatic revocation in most circumstances, that same change cannot be made during the pendency of the divorce proceeding. The New York Appellate Division affirmed a trial court’s decision, finding such that a wife’s decision to change the beneficiary of her life insurance policy while her divorce was pending violated
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Eleventh Circuit: Failure to Give Notice of Time Limit to File Action Does Not Render Contractual Limitations Period Unenforceable

In Wilson v. Standard Ins. Co. (U.S. Ct. Apps., 11th Cir.) the claimant filed her lawsuit claiming long term disability benefits thirty-four months after the three-year contractual limitations period. The claimant argued that equitable tolling should apply because the insurer’s denial letter did not give notice of the time limit and therefore was in violation of the ERISA regulations. The Eleventh Circuit found that the “claims procedure” regulation, 29 CFR 2560.503-1(g)(1)(iv), clearly required notice of the administrative review procedures and those
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Tracking the Uncertainty of the 2016 ACA Health Insurance Rates

Health insurers have begun submitting their proposals for approval of next year’s health insurance rates. For hundreds of Affordable Care Act (ACA) plans, the proposed rates are up by more than 10 percent with insurers seeking increases of upwards of 49 percent for some products. Insurers have cited to increases in drug costs and the receipt of more accurate data on their insureds in support of the proposed rates. Between now and October 2015, when the final rates are published,
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Senate Panel to Probe Eligibility Verification Process for ACA Subsidies

The Senate’s Permanent Subcommittee on Investigations (PSI) has launched an inquiry into government subsidies under the Affordable Care Act available primarily in the form of advance premium tax credits. According to PSI’s letter to Secretary Burwell, the premium subsidies for last year were approximately $15 billion and are expected to reach $849 billion over the next ten years. Prompting the inquiry are concerns of improper over-payments with the goal of preventing government waste. According to the letter, “to ensure proper oversight,
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Seventh Circuit: Federal Government Can Garnish Private Disability Insurance Payments for Restitution Order

U.S. v. France U.S. Ct. Apps., Seventh Cir., Apr. 7, 2015 The Seventh Circuit ruled that the federal government has the power to garnish monthly payments from a private disability insurance policy belonging to a dentist that had been ordered, as part of his guilty plea to mail fraud, to pay restitution to victims for a fraudulent billing scheme. Here, the dentist was ordered to pay $800,000 in restitution to the victims of his fraudulent billing scheme in 2002. However,
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Timing is Key in Determining Primary/Excess Obligations for Claims against Multiple Insureds

A recent Eleventh Circuit decision warns of the dangers in handling claims against multiple insureds. In Nova Casualty Co. v. OneBeacon America Insurance Co., (U.S. Ct. Apps., 11th Cir., Mar. 17, 2015) the district court for the Southern District of Florida granted summary judgment in favor of the primary insurer, finding that although it had breached its duty to defend and indemnify an additional insured in the underlying action, the excess insurer was not entitled to damages because the primary
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N.Y. Court of Appeals Upholds Carriers Interpretation of Ensuing Loss Exception to Water Exclusion

In Platek v Town of Hamberg (N.Y. Ct. Apps., Feb. 19, 2015), New York’s highest court reversed the decision of the Fourth Department appeals court siding with the carrier’s interpretation of the water exclusion contained within a homeowner’s all risk policy. The relevant policy language provided as follows: “ [The policy] does not cover loss to the property . . . consisting of or caused by: . . . Water . . . on or below the surface of the ground, regardless
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U.S. GAO Study Analyzes Market Share Among Health Care Enrollees

The Patient Protection and Affordable Care Act (PPACA) requires the GAO to study competition and market concentration in the health insurance market. This study examined the individual, small group, and large group health insurance markets prior to the implementation of key PPACA provisions that went into effect in 2014 and that could have an effect on competition and market concentration among health insurers. The study found that while several insurers participated in each state’s individual, small group, and large group
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Fifth Circuit: Claimant Must Wait for Actual Claim Denial to File Suit

In an unpublished opinion, the Fifth Circuit affirmed the dismissal of a class action suit that alleged the claim administrator, wrongfully denied payment of medical claims “immediately,” instead of waiting for the participant to fail to provide requested information. In this case, the plaintiff’s son was in an auto accident, and the administrator requested information regarding no-fault benefits before processing the medical claim. The self-funded plan at issue contained detailed provisions regarding Coordination of Benefits, primacy of coverage and information
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Accidental Death Benefits are Payable Drowning, Even if Seizure Involved, was Cause of Death

In Chanthavong v. Union Security Ins. Co., (11/04/2014), the deceased, Corey Carter, was found in April of 2012, having accidentally drowned in his bathtub. Carter held a group life insurance policy established by his employer through defendant insurer that was subject to the provisions off the Employment Retirement Income Security Act. Carter named his son D.D.C., minor-plaintiff, the beneficiary on the policy. The defendant paid the general life insurance policy in full, but denied the claim under the accidental death policy,
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Cigna Has Continued its Battle for Coverage of ERISA Class Action

Cigna has continued its fight for coverage again urging the Pennsylvania Superior Court to overturn a decision that let its excess insurers off the hook over an ERISA class action brought by the company’s employees. The dispute centers on changes to the benefit plan, which U.S. District Judge Janet Arterton’s 2012 decision found had been fraudulently altered. Cigna argues that this finding does not qualify as a fact finding, and that the fraud exemption was inaccurately applied. Cigna’s argument has
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Obama Administration Files Proposed Rules on ACA Preventative Services Coverage–Seeks Input on Logistics

The Obama Administration has filed an Interim Final Rule seeking input on the logistics of obtaining an accommodation and in defining eligible organizations with respect to coverage for preventative services under the ACA. The new interim final regulations establish another option for an eligible organization to avail itself of the accommodation. Under the IFR, an eligible organization may notify the Department of HHS in writing of its religious objection to contraception coverage. HHS will then notify the insurer for an
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GAO Issues “Health” Reports

The Government Accountability Office (GAO) has recently issued two important reports discussing important aspects of the roll-out of the federal exchange and cost-effective preventive measures in U.S. healthcare. The first report, published on July 30, 2014, examines the problematic roll-out of Healthcare.gov. In this report, entitled “HEALTHCARE.GOV – Ineffective Planning and Oversight Practices Underscore the Need for Improved Contract Management,”  GAO noted that the Centers for Medicare & Medicaid Services (CMS) made several critical mistakes in the development of Healthcare.gov.
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Courts Split on ACA Health Insurance Subsidies: Highlights Differences in Statutory Interpretation

On July 22, 2014, two U.S. Courts of Appeals highlighted both the science and the art of statutory construction and interpretation — and came to very different conclusions. These courts were asked to consider an IRS rule (26 C.F.R. § 1.36B-2(a)(1)) associated with a section of the Affordable Care Act that provides tax credits (subsidies) for those who purchase health insurance under the exchanges. The central issue was whether the relevant provision of the ACA (26 U.S.C. 36B(c)(2)(A)(i)) (the provision),
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SCOTUS Rules for Hobby Lobby

On June 30, 2014, SCOTUS issued the last two decisions of the 2013-2014 term. The last of those two decisions was the long-awaited Hobby Lobby decision. The issues in Hobby Lobby were whether closely-held corporations could be required to provide insurance coverage for certain types of contraception that ran contrary to their religious beliefs. Hobby Lobby and the other company at issue, Conestoga Wood Specialties  Corp. are closely held for-profit corporations “owned and controlled by members of a single family”
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Second Circuit: ERISA Claims Raise Reasonable Possibility of Negligence, Trigger Duty to Defend Under EBL Coverage

The plaintiff’s complaint in the underlying action alleged that she had been sexually harassed by a senior executive of the insured and that, when she confronted him about his conduct, she had been wrongfully terminated and coerced into accepting an independent contractor position that disqualified her from receiving certain employee benefits. The insured tendered the defense of the underlying action to the CGL carrier who disclaimed coverage. The underlying action was subsequently settled and the insured then filed a declaratory judgment
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Life, Health, Disability, and ERISA Newsletter is Now Available

Life, Health, Disability, and ERISA provides a summary of decisions from across the country concerning life, health, and disability policies, including those governed by ERISA. Following your review of Life, Health, Disability, and ERISA kindly feel free to contact attorneys and co-editors with any comments you may have, or with any topics you would like to see in upcoming newsletters. For a free copy of this edition, click here.
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Life, Health, Disability, and ERISA Newsletter is Now Available

Life, Health, Disability, and ERISA provides a summary of decisions from across the country concerning life, health, and disability policies, including those governed by ERISA. Following your review of Life, Health, Disability, and ERISA kindly feel free to contact attorneys and co-editors with any comments you may have, or with any topics you would like to see in upcoming newsletters. For a free copy of this edition, click here.  
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Cases for Life, Health, Disability, and ERISA

Cases provided courtesy of Lexis Nexis. Cosey v. Prudential Ins. Co. Gilardi v. US Dept HHS Heimeshoff v. Hartford Kenseth v. Dean Health Plan Killian v. Concert Health Plan Minn. Life Ins. Co. v. Kagan Papotto v. Hartford Life Rochow v. Life Ins. Co. of N. Am Scarangella v. Group Health Truitt v. Unum Life Ins. Co.
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