Source: https://insuranceclaimsbadfaith.typepad.com/insurance_claims_badfaith/premiums/
Timestamp: 2019-04-25 12:06:31+00:00

Document:
GENERICS FORCIBLY REPLACING BRAND PRESCRIPTIONS, LIKE IT OR NOT.
Another agency of the current Federal Government is taking actions to dismantle consumer protections with a new Administrative State. This time it is the Centers for Medicare and Medicaid Services (CMS), located in the Department of Health and Human Services (HHS). They propose to substitute generic drugs for brand drugs when consumers fill their doctors' prescriptions. Their proposal was only posted on January 24, 2019 and, in a relatively short period for Comments, the deadline for leaving a Comment including in opposition to these new-Federal Government proposals, is Tuesday, February 19, 2019.
Here are the complete Comments I left on https://www.regulations.gov on Sunday, February 17, 2019 in opposition to these particular proposals.
Department of Health and Human Services (HHS).
Re: Proposed Changes to ACA Benefits and Payments Parameters for 2020.
These Comments are regarding your proposed addition to Regulations in 45 CFR, new proposed §§ 147.106(e)(5) and 148.122(g)(5), and wherever else the same proposed changes discussed in these Comments may be found in your proposals. Your proposed new regulations §§ 147.106(e)(5) and 148.122(g)(5) are published in 84 F.R. at pp. 313-314.
The new additions you propose to existing law would be to allow issuers of plans covering prescription drugs to remove the equivalent of brand drugs from the formulary, i.e., from the plan of prescription drugs that are covered by the issuer. See, e.g., 84 F.R. at 234.
There are at least three obstacles to implementing these proposed new regulations as law. The three I would like to address in these Comments are (1) that the proposed new regulations are not a reasonable approach to the availability of prescription drugs to consumers who pay for prescription drug plans, or formularies; (2) that the proposed new regulations are a windfall to the issuers of plans covering prescription drugs, at the expense of consumer choice, and (3) that the term, "generic equivalent," is new and undefined, without so much as a reference I can find to the Federal Food and Drug Administration's process of testing and approving generic drugs for use by consumers.
First, the proposed new regulations are not a reasonable approach to the availability of prescription drugs to consumers who pay for prescription drug plans, or formularies. The goal of adding generic medical equivalents to prescription drug plans, or drug lists, could reasonably be accomplished without mentioning the removal of brand drugs from the formulary at all.
The real effect of proposed new regulations like §§ 147.106(e)(5) and 148.122(g)(5) is not to permit the addition of generic equivalent drugs to an issuer's list of covered drugs, but rather to permit the issuer to remove brand drugs from the issuer's list.
That in itself is an unreasonable change to the law and, moreover, it is not authorized by the enabling Congressional legislation in the first place. The clear purpose of the enabling statute was to foster consumer choice, not to limit consumer options, especially when it comes to prescription drugs.
That ties in to the second objection addressed in these Comments. The proposed new regulations, such as for example §§ 147.106(e)(5) and 148.122(g)(5), are an undeserved windfall for the makers of generic drugs, and at the expense of consumer choice. Lists of covered drugs are of course lists contained in plans for coverage of drugs. These plans are paid for by consumers in whole or in part including by the payment of deductibles and co-pays, and often paid for as well by a share of the premiums charged for coverage under these plans. Consumers have paid for the right to have their physicians and medicalcare providers prescribe drugs and to fill these prescriptions with brand drugs at the option or choice of the consumer, and not by the choice either of the pharmaceutical manufacturer or the issuer. For this reason as well, the proposed new regulations, including §§ 147.106(e)(5) and 148.122(g)(5), should not and cannot be adopted.
The third and final objection to proposed new regulations §§ 147.106(e)(5) and 148.122(g)(5) which will be addressed in these Comments is the undefined use of the phrase, "generic equivalent." This phrase is found in the proposed new authority to be conferred upon issuers to "add a generic equivalent to a formulary[.]" See, e.g., proposed new regulation § 147.106(e)(5), 84 F.R. at p. 314, and proposed new regulation § 148.122(g)(5), also in 84 F.R. at p. 314.
The phrase used in this new proposed regulation is not limited to "medically equivalent." (Emphasis added.) Nor is it limited by reference, so far as I can find, to FDA-generic-approved medicines. Without such limitations, the proposed new authority to replace brand drugs on drug lists with "a generic equivalent" is overly broad and so it is meaningless. It would, for example, allow issuers and generic drug manufacturers to buy their way onto drug lists to add drugs that their own proprietary 'research' and support has 'determined' to be "a generic equivalent," without limitation to generic medicines already approved by the FDA. For this reason as well, the proposed new regulations, including §§ 147.106(e)(5) and 148.122(g)(5), provide no limiting guidelines and so are void and of no effect. They cannot validly be promulgated.
For each and all of these reasons, whether taken separately or together, the proposed new regulations, including §§ 147.106(e)(5) and 148.122(g)(5), cannot validly be promulgated as administrative regulations and, moreover, they are void and of no effect as new law.
Please Read The Disclaimer. This post ©2019 Dennis J. Wall. All Rights Reserved.
NO CHRISTMAS MIRACLE IN CALIFORNIA.
This article springs from "An Unopposed Christmas Miracle in Pennsylvania," which was published here on December 20, 2017.
I noted in an article published on Insurance Claims and Bad Faith Law Blog on December 26, 2017, that I reviewed the electronic court file of a federal case in California on PACER. I have since reviewed that electronic court file even more closely, and the results are startling.
The case is Feller v. Transamerica Life Ins. Co., No. 2:16-cv-01378-CAS-AJW, filed in the U.S. District Court for the Central District of California. The issue is concealed evidence in this insurance case. The plaintiffs sued their life insurance company based on claims that their carrier overcharged them for premiums.
That fact should be kept in mind, or nothing wonderful can come of this story, to borrow a line from Dickens' A Christmas Carol. Made concrete and applied to this life-insurance-premium case, it clearly outlines the range of conceivable needs, if any, and of course desires for "redaction," "sealing," and secrecy, in short, for concealing the evidence.
The results of two searches on the electronic docket are revealing (no pun intended). The first of my searches that I want to report here was for the word, "stipulation." The word was found 48 times since the first document was filed 23 months ago on February 28, 2016.
That is an average of more than 2 stipulations per month.
The second of my searches that I want to report here was for the word, "seal." This search yielded 205 results. That means that the docket referenced 205 times when evidence was requested to be sealed, including of course many repetitions of the word, but still resulting in a total of 205 results.
Some of the things that were sealed either raise questions or are outright unknown except to the parties and perhaps to the District Judge or to the Magistrate Judge. Two examples, in turn, will be sufficient here to illustrate.
The judge made one change, apparently. The District Judge crossed out the word, "PROPOSED," before she signed the Order.
There are no findings in the Order that the District Judge signed.
There are no recitals of fact in it at all.
There are no citations of legal authorities.
We know only from the Clerk's docket that the District Judge's Order sprang out of the Plaintiffs' Application. We cannot see this Application, however, because the public is not allowed to see it.
The Application is designated as Doc. No. 132 on the Clerk's electronic docket, filed October 10, 2016. It is not accessible. It is known only from the docket entry written by the Clerk.
To put it simply, among the many things we are not going to know from this, is what documents were sealed by this slice of the proceedings and what testimony was concealed from public view by this one motion and one Order among many.
In a case alleging not state secrets, but instead alleging overcharged-insurance-premiums-claims.
The second example from reviewing the electronic court file that illustrates the existence of questions concerning rulings and sealings, concerns the pleadings. This specific example relates to Doc. No. 149 on the Clerk's electronic docket, apparently filed on Halloween in 2016 after a pair of secrecy orders were entered.
This renewed application is based on the accompanying memorandum of points and authorities, the declaration of Larry N. Stern and attached exhibits, the declaration of Andrew S. Friedman and attached exhibits, and such further and other evidence as may be presented at or before the hearing of this motion.
It should be noted that much of the other evidence cited in this motion is sealed.
So is the Plaintiffs' Memorandum in Support of their Renewed Application for Preliminary Injunction.
It is a pleading on which a judge is asked to rule in a case affecting the premiums paid to a life insurance company.
Still and all, we cannot see it. It too is sealed from public view.
Dennis Wall is continuing to work on a book based in part on investigations into public records of actual court files involving concealed evidence and how it affects our lives.
HAVE A HAPPY NEW YEAR THROUGHOUT 2018!
PRUDENTIAL INVESTIGATED WELLS FARGO'S "ROI" POLICIES. GUESS WHAT THEY FOUND?
Prudential made a deal with Wells Fargo. Wells could issue "a low-cost life insurance policy to the bank's retail customers." Wells Fargo issued the policies on Prudential paper. These policies, called "MyTerm" policies, were basically "ROI" policies, or insurance for the Return on Investment.
When the story broke of 5,000 employees at Wells Fargo somehow setting up fake accounts for Wells' customers in order to get sales credits for the sales quotas set at Wells, Prudential decided to investigate these "ROI" policies issued by Wells in Prudential's name.
"'This definitely was the same kind of [alleged] conduct that Wells was committing, but through Prudential,'" said one of three whistle-blowers, "an attorney and former co-head of Prudential's corporate investigations division[.]" Turns out that Wells Fargo employees could get sales credits good toward their sales quotas at Wells by issuing fake 'Prudential' MyTerm life insurance policies in the names of Wells' customers to cover the Return on Investment of the nonexistent accounts. See Stacy Cowley and Matthew Goldstein, "Accusations of Fraud at Wells Fargo Spread to Sham Insurance Policies" (New York Times Online, posted on December 9, 2016), at http://www.nytimes.com/2016/12/09/business/dealbook/wells-fargo-accusations-sham-insurance-policies.html.
Lessons learned. Some would say, though, that they already knew what there is to learn from this particular lesson.
Gouging Insurance And Us ... If We Let Them.
CALIFORNIA LAWSUIT: THEY WERE AGAINST IT, BEFORE THEY WENT AND DID IT.
California recently required insurance carriers to roll back premium rates.
State Farm has sued to keep their rates. Read the story of this insurance litigation here: See Andrew Khouri, "State Farm Files Lawsuit to Block Historic Rollback in Insurance Rates" (Los Angeles Times Online, posted Wednesday, December 7, 2016), and accessible with a copy-and-paste into your browser: http://www.latimes.com/business/la-fi-state-farm-insurance-20161206-story.html.
Please Read The Disclaimer. Copyright 2016 by Dennis J. Wall. All Rights Reserved.
INSURANCE CLASS ACTION SECRECY REVERSED, INSURANCE CLASS ACTION SETTLEMENT REJECTED.
PART ONE: Insurance Class Action Secrecy REVERSED. Hang on; this may be only a part of the story of this decision, but it is a LONG part. We'll discuss the background of this case first.
Blue Cross Blue Shield of Michigan is a huge player in health insurance plans in Michigan. With over 60% of the market, it can help many people. Or it can allegedly fix prices.
By 2007, or so the United States Department of Justice alleged in a complaint, Blue Cross initiated a "price-fixing scheme." Blue Cross insisted on either one of two kinds of agreements with Michigan hospitals. One was an "MFN" agreement, in which "Blue Cross agreed to raise its own reimbursement rates for each hospital's services, so long as the hospital agreed to charge other commercial health insurers rates at least as high as the hospital charged Blue Cross."
The other was an "MFN-plus agreement." Under that second kind of agreement, "Blue Cross agreed to pay higher rates to each hospital so long as the hospital agreed to charge even higher rates -- up to 40% higher, according to DOJ's complaint -- to other commercial health-insurers."
Blue Cross's two plans brought results. "Few if any of the hospital systems in Michigan can afford to turn away an insurer that brings with it more than half of the privately insured patients in Michigan." Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *1 (6th Cir. June 7, 2016).
DOJ's lawsuit soon attracted class action lawsuits filed on behalf of individuals who alleged that they and their putative classes of Michigan hospital patients were damaged by the increased fees which Blue Cross allegedly caused Michigan hospitals to charge for medical services. "Thus, the effect of Blue Cross's market power was not to lower its customers' rates, as typically advertised. Instead the effect was to raise them, for Blue Cross's customers and everyone else -- while preserving or expanding Blue Cross's market share." Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *1 (6th Cir. June 7, 2016).
The consolidated class action lawsuits ultimately resulted in secrecy agreements which were confirmed by secrecy orders, and an overall order approving a health insurance class action settlement.
This article is in two parts. This first part addresses the secrecy orders in this case which the Sixth Circuit reversed. The second part will address the Sixth Circuit's rejection and remand of the lower court's order approving the insurance class action settlement.
Part 1. The Secrecy of the Health Insurance Class Action Settlement.
Plaintiffs' class counsel attached 90 exhibits to their motion for class certification. All of it was filed in the Court file under seal.
Blue Cross attached 42 exhibits to its brief opposing the class action certification. All of these too were filed in the Court file under seal.
Later, Blue Cross filed a motion to exclude the plaintiffs' class action expert's "report and testimony, attaching his report and 34 other exhibits." All of these materials were also filed under seal. Parenthetically, the settlement provided that the expert would be paid $2 Million from the class action settlement for his sealed report. Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *4 (6th Cir. June 7, 2016).
Ultimately, the parties requested that the District Court seal certain pleadings plus 194 exhibits in the Court file, and the District Court entered the requested sealing orders during the course of approving the parties' proffered settlement.
Objectors who were not class members argued that their lack of access to the Court record, particularly to the record of materials upon which the class action plaintiffs settled with Blue Cross, deprived them of the ability to evaluate the settlement. A "group of 26 self-insured businesses with health plans administered by Blue Cross (a group we call the 'Varnum Group') also sought to unseal the court record by means of a motion to intervene for that limited purpose." The district court approved the proposed settlement and the secrecy of the sealed materials, and denied the motion to intervene. Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *3 (6th Cir. June 7, 2016).
The Sixth Circuit reversed the trial court's secrecy rulings. To the contrary, the Sixth Circuit held that the District Court "abused its discretion when, at the parties' behest, it sealed from public view most of the court filings and exhibits that underlay the proposed settlement in this case." Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *3 (6th Cir. June 7, 2016).
Without necessarily ruling on any of the secrecy stipulations and secrecy orders entered with regard to discovery in this case, the Sixth Circuit pointedly noted that there is a great difference between discovery protective orders, and orders to seal court records entered upon adjudication. Unlike "a mere protective order [which] restricts access to discovery materials," an order adjudicating the case and sealing materials in the Court file affects the public interest. Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *5 (6th Cir. June 7, 2016). There is in other words a presumption against sealing Court files and in favor of public disclosure because keeping Court files open to the public is infected with a public interest.
"[I]n any of these cases, the public is entitled to assess for itself the merits of judicial decisions."
Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *3 (6th Cir. June 7, 2016) (emphasis added).
Further, "[t]he burden of overcoming that presumption [of openness as to Court records] is borne by the party that seeks to seal them." This requires only the most compelling reasons. Further, those reasons must be articulated "'in detail, document by document,'" with legal citations. Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *3 (6th Cir. June 7, 2016). The parties all sought to seal the Court records in this case. None of the parties met their burdens.
Nor did the District Court meet its own duties before it entered orders sealing materials in the Court file in the course of approving the parties' class action settlement. Before a District Court can properly enter such orders, it must set forth its "specific findings and conclusions," regardless of whether any party objects to the sealing. A District Court's failure to set forth its detailed reasons for sealing the Court file before it enters its orders sealing the Court file "is itself grounds to vacate an order to seal." Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *4 (6th Cir. June 7, 2016).
As noted, the Sixth Circuit reversed the District Court's sealing orders which the District Court entered during the course of its order adjudicating the class action settlement with approval. However, the Sixth Circuit did not base its holding simply on the lower court's failure to state its detailed reasons for sealing. The Sixth Circuit examined the record. It noted that among other materials in the Court file which the District Court sealed from public view were "the Plaintiffs' Amended Complaint, the Plaintiffs' Motion for Class Certification and Blue Cross's Response," and a total of 194 exhibits. Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *4 (6th Cir. June 7, 2016). The District Court accepted the bases for sealing these materials which the parties put before the Court, reasons which "were brief, perfunctory, and patently inadequate." According to the Sixth Circuit, the parties and the District Court in this case "conflated" discovery protective orders with sealing a Court file as a part of a Court's adjudication of the case. The class plaintiffs, for example, asserted that sealing was proper simply because Blue Cross or a third party designated the materials as confidential.
One can only conclude that everyone in the district court was mistaken as to which standard to apply. But one point is unmistakable: on the showings set forth in this record, every document that was sealed in the district court was sealed improperly.
Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *4 (6th Cir. June 7, 2016).
The Sixth Circuit accordingly reversed and told the parties and the District Judge to do it again if they wanted to seal the Court file again in this insurance class action case. It is well worth noting that although this case involves a health insurance class action settlement, the supposed justifications advanced by counsel and accepted by the trial Court are often found in many other types of insurance -- and other -- class action lawsuits.
STANDING TO SUE AND CLASS ACTION PROCEDURES: Part 2 of 2.
Standing to Sue and Class Action Certification: Part 1.
LABOR DAY, "FORTUITOUS" INSURANCE COVERAGE, AND FORFEITURE OF FAVORED PREMIUMS.
I have been thinking about the "fortuitous" requirement and its mother, the "known loss doctrine." These are related concepts of claim denial. In other words, they are reasons for denying insurance coverage based on the claimant's actual knowledge that the loss already existed before applying for coverage for it. Even accepting the majority view that "known loss" depends on proof that the person claiming coverage actually knew of the loss, which would make the risk which caused the loss uninsurable because it was not "fortuitous," there are other areas of insurance besides claims that may benefit from an expansion of the concepts.
For one example, "retro premium" policies depend in part on a loss history as a basis for premiums. To the extent that the policyholder claims a lower premium based on a positive loss history, the policyholder's knowledge of losses before they happened seems relevant. Suppose as an illustration that the given policyholder's loss history is skewed in a positive direction because it paid and perhaps continues to pay below-market wages. Perhaps it is a manufacturer which has outsourced its manufacturing operations to a labor market like the one in Vietnam which famously pays wages way below the minimum wages prevailing anywhere in the United States. To the extent that the policyholder's "retro premiums" in this illustration are calculated on the basis of below-market wages, then the policyholder's knowledge will have no problem meeting the prevailing majority view of the "known loss doctrine;" after all, our hypothetical manufacturer moved its operations to Vietnam in order to make more profit by paying less wages to its workers. Nothing could be more intentional than that, most people would say.
As for who would prove what were the prevailing market wages during the time when the retro premium is calculated, insurance companies are in a perfect position to meet this burden. Insurance companies are already skilled at dealing with accountants and economists. Let's start with proof of wages below the minimum prevailing in the jurisdiction in which the retro premium is contested. If for some reason that jurisdiction has no minimum wage, then the insurance company should be permitted to put on proof of the wages prevailing in comparable markets that do have minimum-wage protections.
This is a good time to speculate on such things as we are invited to contemplate the continuing meanings of Labor Day.
What was in the insurance company's rate filing when it requested approval of its rate?
Judges, defense lawyers, and policyholder lawyers should start asking this question. Inquiring minds want to know the answer. Before the so-called doctrine is applied in even one more insurance case.
Please Read The Disclaimer. Copyright 2015 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015), which includes a look at the filed rate doctrine. All Rights Reserved.
FILED RATE DOCTRINE FOREIGN TO INSURANCE QUESTIONS. KICKBACKS NOT INCLUDED.
MAKING MONEY OUT OF LENDER FORCE PLACED INSURANCE.
Settlements are good business. Actually, settlements are a way of doing business in lender force placed insurance class action cases in Federal Courts. A recent example: Casey v. Citi (NDNY Case No. 12-00820).
A new report about a new settlement agreement in a lender force placed insurance case has just been published. Some of the details appear to be garbled in the transmission. For that reason, we will not mention what news information service has taken the lead on this reporting.
A new settlement agreement has been filed in the Federal case of Casey v. Citi (NDNY Case No. 12-00820). The parties have recently requested the Federal Court's approval of their proposed class action settlement in that lender force placed insurance case. They filed their motion seeking preliminary approval of their class action settlement on February 5, 2014. Download Casey v. Citi (NDNY 12.00820).Ps M Prelim Appr Class Action Settlement.Fd020516. The Federal Court has set a Hearing to approve on March 14, 2014.
This article is based strictly on the popular reporting concerning this announced settlement, and on some experience with similar settlements in lender force placed insurance class actions especially in Federal Court. When I have had some time to review the parties' documents in the specific Casey case, I will comment on them.
According to the popular press which for our purposes includes what might be called "the business press," Citigroup, Inc. and the Plaintiffs in Casey have agreed to a settlement in which Citi will pay $110,000,000.00 or $110 Million to the Plaintiffs-homeowners.
Let's take that figure at face value. Let's assume that Citi will pay up to $110 Million in cash. First off, Citi reportedly only has to pay Plaintiffs who 'present a claim'. Not all class members in any class ever known actually end up 'presenting a claim,' of course. From the beginning, it is obvious that Citi's 'payment' may not be a payout to all the people affected in this case by lender force placed insurance practices.
In the settlement agreement in Casey, the parties reportedly agreed to request Court approval of Citi paying 12.5%. I calculated that figure as $94,750,000.00.
I then calculated the difference between the two figures -- what Citi reportedly received as "commissions" for force placing "hazard insurance" at a commission rate of 15%, versus the amount Citi reportedly will pay 'back' on the same amount at the rate of 12.5% -- and the difference is $18,950,000.00.
Parenthetically, Citi will not have to give up ever charging "commissions" again on lender force placed insurance. They and the class action homeowners are requesting the Federal Court to approve a moratorium of 6 years and then Citi can resume the practice of charging commissions if the Federal Court in the Casey case gives its approval of this practice. If that practice is approved by the Federal Court in this settlement, the Court's approval is almost certainly far more than Citi could have hoped to obtain by litigating the practice.
Lender force placed Flood insurance was also at issue in the Casey case. Reportedly, homeowners were charged $173,000,000.00 or $173 Million in premiums for it and reportedly, Citi did not collect "commissions" on those premiums but will pay 8% of that figure in addition to its 'payout' on the lender force placed "hazard" insurance claims. Taking this reporting at face value as well, this would mean that Citi would pay cash of $13,840,000.00 to settle all the Casey class action lender force placed Flood insurance claims.
Citi would still make a profit. After all these "ifs," Citi would still be ahead of the game by $5,110,000.00, a figure not reported in the popular press. That is the difference between what Citi reportedly took in as "commissions" from the homeowners represented in this class action lender force placed insurance case -- $113,700,000.00 -- versus what Citi reportedly would pay out to them if Citi pays cash to all the affected homeowners -- $108,590,000.00.
Now, having said all that, let's return to those "ifs" I mentioned. There are a lot of them. First, even if -- really in all probability, not if but "when" -- this proposed settlement is approved, not all homeowners in the class will benefit. Citi will only have to 'pay' those homeowners in the class who make claims after the Court approves the settlement, which by experience well known to Citi and to others does not mean all the homeowners affected by the lender force placed insurance practices at issue in Casey.
Second, although defendants in past lender force placed insurance class action cases may have settled exclusively for cash, I am not aware of them. Citi's 'payout' is almost certain to be a mix of a relatively small amount of cash, coupled with "credits" to Citi for such things as mortgage principal reductions which do not involve the payment of cash but which settlement agreements in these cases involve "credits" for stated values treated as cash for purposes of the settlement, including for purposes of the ensuing press releases which inevitably follow these agreements.
Third, these figures are based only on popular reports concerning "commissions". It is unclear how much money Citi allegedly earned, let alone how much money it did take in, from other lender force placed insurance practices if any.
Finally, no-one should forget that, reportedly, Citi successfully bargained in this case for its legal ability to charge "commissions" on lender force placed insurance. That is huge for Citi.
More to come, after I have the time to review the settlement documents. In the meantime, a reminder: March 14, 2014, as noted above, is the date set by the Federal Judge for hearing the parties' arguments to approve their proposed mutual class action settlement against lender force placed insurance practices in the Casey case. The hearing will be held in Utica, New York before U.S. District Judge David N. Hurd.
Rulings in the Casey case were previously discussed in this article posted here on August 1, 2013.
OBAMA CAUSED HEALTH CARE PREMIUM INCREASES IN 2007, SOME SAY.
A couple of retailers have recently cut health insurance benefits for their part-time employees. Target is the most recent example, joining Home Depot and Trader Joe's (if you call them retailers) in cutting health insurance benefits for part-time employees. Alex Wayne, "Target to Drop Health Insurance for Part-Time Workers" (Bloomberg, posted on January 22, 2014).
They blame Obamacare. See id. There are a couple of problems with this line. For one thing, the Affordable Care Act a/k/a "Obamacare" does not require employers to provide health insurance to part-time workers.
Further, blaming Obama for healthcare premiums is misplaced. The trend toward cutting health insurance benefits for part-time employees began sometime around 2007. George W. Bush, not Barack Obama, was President. Obamacare was not even thought of and it was not enacted into law until 3 years later.
So, do you think that these employers will give any part of the money back by paying higher wages?
Bad Insurance Deals Push Cities to Brink.
U.S. counties and cities are going bankrupt. County administrators and city managers blame employees and the employees' pensions and unions, with whom they contracted.
The real problem is not enough money. Bad insurance products are a much bigger cause of bad budgets than anything else including pensions. The root cause is the people who made, and make, bad budget decisions.
Interest rate swaps and credit default swaps ("CDS," another form of credit insurance) are not subject to pressure. Munis must pay the premiums. There is no exemption for derivatives, for which the munis contracted as a part of their financing, even if the munis declare bankruptcy. The derivatives manufacturers made sure of that. See, e.g., Mary Williams Walsh, "Detroit Wins $55 Million Concessions From 2 Banks" p. B1 (New York Times Nat'l ed., Wednesday, December 25, 2013); Mary Williams Walsh, "'Safe Harbor' in Bankruptcy is Upended in Detroit Case" p. B1 (New York Times Nat'l ed., Tuesday, December 24, 2013).
As a result, bankrupt debtors including counties and cities have no ability to pressure a creditor whose deal is backed up by law enforcement.
Nor do bankrupt debtors have any incentive to draw unwanted attention to their derivatives creditors. If they do, they might not get financing the next time.
Small-government or muni administrators who agreed to have their munis pay for these insurance products had and have little experience with them. They do not know what they are getting into. DENNIS J. WALL, 1 "LITIGATION AND PREVENTION OF INSURER BAD FAITH" §§ 3:109 & 3:110, "The New 'Credit Insurance?' Credit Default Swaps" & "Bond Insurance on and for 'Municipal Bonds,' and the Subprime Credit Crisis" (THOMSON REUTERS WEST THIRD EDITION AND 2013 SUPPLEMENT).
Employees, pension plans and unions are subject to intense pressure on the other hand. That pressure includes small-government officials putting out the story that government employees and unions are responsible for bad budgets. See Rick Lyman and Mary Williams Walsh, "Police Salaries and Pensions Push California City to Brink" p. A1, col. 5 (New York Times Nat'l ed., Saturday, December 28, 2013). The reporters' story is written much more fairly than the headline written by an editor suggests. But we know from previous New York Times reports in particular that bad financial insurance products are a much greater cause of bad muni budgets. Again, see, e.g., Mary Williams Walsh, "'Safe Harbor' in Bankruptcy is Upended in Detroit Case" p. B1 (New York Times Nat'l ed., published in print on Christmas Eve, 2013); Mary Williams Walsh, "Detroit Wins $55 Million Concessions From 2 Banks" p. B1 (New York Times Nat'l ed., published in print Christmas Day, 2013).
The root cause of bad municipal budgets today is the bad insurance purchasing decisions made yesterday. Those bad decisions were made by some if not most of the same muni managers that are also responsible for misdirecting our attention away from their bad insurance purchasing decisions, to the contracts they entered into for employee pensions, i.e., to their employees. County and city employees are to be forgiven if they are under the impression that small governments would stand by the contracts they made with their employees, too.
... UNDERWRITERS POINT TO THEIR COMPUTER MODELS TO TEE OFF ON SANDY DAMAGE.
Computer models. Underwriters are now using computer models to justify talk of higher Premiums to come in the Northeast after all the damage that Sandy caused, if property or flood insurance are going to be made available at all in the Northeast.
In virtually the same language across the Internet, all sorts of sites are publishing the observation that after Sandy, underwriters and the makers of Catastrophe computer models all "will now treat the Northeast more like the Southeast when it comes to property pricing and the availability of flood insurance." A representative sample comes from Amy O'Connor, "After Sandy, Underwriters, CAT Models View Northeast Like Southeast: NAPCO" (Insurance Journal Online, posted May 6, 2013).
There is definitely something to it, in a sense. There is a recognition in that repeated observation that climate change is not only real right now, it is also so much the reality of our future that even the Northeast can expect previously unusually destructive weather and coming at previously unusual times of the year, as Sandy did.
However, the idea that opinions about what exactly the future will bring, fed by underwriters into computer programs which exist for the purpose of supporting premium rate increases which are going to be requested from State Insurance Commissioners, is suspect, notwithstanding.
This shameful exercise with computer programs force-fed by underwriters is not good faith nor fair dealing.
SANDY STORM SURGE CONTINUES: NEW LIMITS ON PUBLIC, INSURANCE POLICIES.
This article follows up on a series recently posted here and on Insurance Claims and Issues Weblog.
The turmoil wrought by Sandy did not stop after Sandy passed through. Sandy's turmoil may have only begun then. Sandy's turmoil continues now, affecting many areas of life which are now coming to the forefront.
Housing prices have understandably fallen over a price cliff along the Coastal areas affected by Sandy.
In addition, Mortgages are much harder to obtain, and when obtained, they are much more expensive for would-be home purchasers -- and for existing homeowners who want to repair and rebuild -- in those same Coastal areas. Banks reportedly have become "unwilling to provide mortgages to people seeking to buy in an area at risk for another catastrophe, or even to refinance properties so homeowners can pay for their own repairs".
As a result, "a cut-price cash sale is sometimes the [existing homeowners'] only option." Sarah Maslin Nir, "Along Coast, Hurricane Left Housing Market in Turmoil" p. A18, col. 1 (New York Times Nat'l ed., Friday, December 28, 2012).
An additional factor which thereby directly affects the current Housing market is "the pending release of new flood maps," Sarah Maslin Nir, New York Times, supra, a development which of course also directly affects the issuance and underwriting of Flood Insurance.
Further, the turmoil in Sandy's wake includes new reports of increased unemployment from businesses forced to close or cut down their operations as a result of losses caused by Sandy. "Those most affected are the people who already have trouble finding jobs: older workers, single parents with child-care concerns and immigrants who speak little English." Julie Turkewitz, "Unemployment Deepens Loss From Hurricane as Businesses Remain Closed" p. A19, col. 1 (New York Times Nat'l ed., Friday, December 28, 2012).
As the New Year is about to begin, please join me in a prayer for our Country and for its people in 2013, a big part of which is our prayer for fair and just solutions to all of the issues addressed in this series, including in Housing and Employment and Business areas, and in the Insurance Issues which affect them all.
AFTER SANDY: FACING LIMITS ON PUBLIC POLICY, INSURANCE POLICIES Continued.
After Sandy: Staying the Course Has Public, Insurance Policy Limits.
Sandy has laid bare the interplay between an insurance policy and a public policy. Flood Insurance is underwritten by the Federal Government. It is not the only Federal program triggered by Floods. There are other Federal programs, and there are private efforts to handle the risk of Floods as well. This is the first in a continuing series of articles on the public policy behind efforts to combat catastrophic Flood damages, the subject being too great to examine in a single article. Some will be posted here, and some will be published on Insurance Claims and Issues Blog, in a continuing daily series until we reach the end of the policy issues exposed by Sandy's winds and floods.
2. Pay lower Premiums to insure against the risk of Flood damage than they would otherwise pay if they could even find Flood Insurance for their flood-prone properties.
In general terms, typical Premiums charged under the Flood Insurance Program to property owners in flood-prone areas, reportedly range between $1,100.00 to $3,000.00 per year for the structure, and an additional $500.00 or so per year for contents coverage. These Premiums will buy $250,000 limits of coverage for flood damage to the structure, and $100,000 limits of coverage for such damage to the contents. See David M. Halbfinger, "Post-Storm Cost May Force Many From Coast Life / Woes for Nonwealthy / Flood Insurance Rates to Go Up as Rebuilding Becomes Stricter" p. A1, col. 1 (New York Times Nat'l ed., Thursday, November 29, 2012).
The Federal Government is not displacing private enterprise with the Federal Flood Insurance Program. As a general rule, private Insurance Companies will not offer Flood Insurance for which they are on the risk. The risk of flood damage is too great for them in the ordinary case. Halbfinger, New York Times Nov. 29, 2012, supra.
Instead, private insurance Companies contract with the Federal Government to "front" Flood Insurance Policies for which the Federal Taxpayers, not they, are on the risk. For doing this, they collect a percentage of the Premium. As a part of their arrangement with the Federal Government, the private Insurance Companies which front Flood Policies also get paid to service Flood Insurance Claims.
Next: The Public Policy behind every Flood Insurance Policy.
Force-Placed Insurance Issues in New York: Your State, Too.
The New York State Department of Financial Services has issued an order to three Insurance Companies to submit new Premium rates for force-placed Insurance, because the companies overcharged millions of dollars for it. The three companies have until July 6, 2012 to respond. The companies receiving the order are Assurant (a unit of American Security Insurance Company), QBE, and American Modern Home Insurance Company. These three companies "make up more than 90 percent of the so-called force-placed insurance market in New York." Zachary Tracer, "New York Asks Insurers of Lapsed Borrowers for New Rates" (Bloomberg.com, posted June 12, 2012).
Other reports previously estimated that Assurant and QBE alone control about 90 percent of the force-placed insurance market in New York State. See "Forced-Placed Insurance Under Investigation," posted here on May 22, 2012.
And here is a link to the New York State Department of Financial Services' Press Release announcing this action and the requirement that responses must be submitted by July 6, 2012: Press Release, "Governor Cuomo Announces DFS Action Could Save Some New York Homeowners Millions in Overcharges to Home Insurance," June 12, 2012.
Do not think that the issues of force-placed Insurance belong only to New York State. The issues of force-placed Insurance apply across the nation. The issues include Premium charges, forced placement of Insurance selected by the Lenders and their Mortgage Servicers when homeowners are not actually in default in carrying the Insurance which the homeowners selected, and issues involving an implied covenant of Good Faith and Fair Dealing not only by the Force-Placed Insurance Companies, but allegedly by Banks, Lenders, and Mortgage Servicers too. See, e.g., "Force Placed Insurance and the Duty of Good Faith," posted here on June 12, 2012; "Good Faith in Lender-Placed Insurance?" posted here on April 12, 2012.
Your Federal Tax Increases to Subsidize Others' Business Insurance Premiums.
Wow. The more you hear about Federal Subsidies of Crop Insurance Premiums of other people and corporations in the business of raising or not raising crops, the more you think about the implied covenant of Good Faith and Fair Dealing.
Not content with subsidization of 2/3 of Crop Insurance Premiums by our Federal Tax Money, a bill is pending in the U.S. Congress to increase the use of our Tax Dollars to subsidize those that pay Crop Insurance Premiums. R. Nixon, "Amid Growth, Plan to Insure Risks on Crops" p. A1, col. 1 (New York Times Nat'l ed., Thursday, June 7, 2012), posted online under the headline, "Crop Insurance Proposal Could Cost U.S. Billions".
Parenthetically, if you had any doubt about the priorities in Congress, it reportedly is certain that a bill to increase the minimum hourly wage will not be allowed even to come to a vote in the House of Representatives. Rebecca Berg, "Bill Pushes For Increase In Wages" p. B1, col. 6 (New York Times Nat'l ed., "Business Day" Section, Thursday, June 7, 2012).
Crop Insurance Premium subsidization. An example of those that have, get more, and they get it from you and me. Who knew? See posts on Insurance Claims and Issues Web Log on April 18, 2012 and on June 6, 2012.
Good Faith in Lender-Placed Insurance?
Force-placed Insurance is also known as lender-placed Insurance. The right to place Insurance is a right borrowers give up by contract. If borrowers fail to keep Insurance in place on mortgaged property, they give lenders the right to place Insurance on the property and send the Premium bill to the borrowers.
There are apparent problems in practice with how lenders exercise lender-placed Insurance rights. At least in New York State, there is reported evidence of scams to direct placement of that Insurance to selected companies for higher Premiums. Sometimes, there is evidence of kickbacks and added fees for Reinsurance to protect these Insurance Companies but not the borrowers of course, in New York State. See Liz Rappaport and Leslie Scism, "Insurers Facing Greater Scrutiny" p. C1, col.6 (Wall Street Journal, Thursday, April 5, 2012).
Although there is a reported ongoing investigation of underway in New York State, the exposure of Insurance Companies issuing the lender-placed Insurance is said to be particularly high in Florida in part because of the high number of Florida Foreclosures. Id.
If a borrower gives up a right to place Insurance on mortgaged property, it seems that at least arguably, lenders should, do or may have a corresponding Fiduciary duty of Good Faith in the exercise of that right and to Deal Fairly with the borrower who not only has given up the right exercised by the lender, but pays the bill for the Insurance product selected by the lender.
COMPUTER MODELS COMMISSIONED FOR HOMEOWNER INSURANCE PREMIUM HIKES.
"But the catastrophe models at the core of just about every aspect of hurricane insurance, from rates to regulation, are flawed.
A Herald-Tribune review of regulatory filings and interviews with experts found ... [s]everal companies seeking rate increases [which] used models that left out data about safety features on the homes they insure -- factors that would have reduced their expected losses and undermined their request for higher premiums."
Paige St. John, "Insurers' Computer Models Deeply Flawed" (Sarasota Herald-Tribune Online, Monday, November 15, 2010).
Some but by no means all Homeowner's Insurance Companies are seeking Premium Rate Increases based in part on selective Computer Models.
These Computer Models are input by organizations which sell them to Homeowner's Insurance Companies for use in making Premium Rate Requests.
Computer Models recently submitted to the Florida Office of Insurance Regulation with Homeowner's Rate Hike Requests reportedly predict continuous Hurricane Damage in Orlando and West Central Florida. These are the Computer Models sold to some of the Homeowner's Insurance Companies which are using them as a reason for Rate Increases. Newspaper reporters noted for their expertise with Insurance issues who have reported on this fact include, e.g., Jeff Harrington, "Five Reasons That Florida Homeowners Insurance is Still Getting More Expensive" (St. Petersburg Times Online, May 31, 2011); Julie Patel, "Home Insurers Request Rate Hikes" ("House Keys" Blog on Sun-Sentinel.com, posted Monday, June 13, 2011); Paige St. John, "Property Insurers Seeking Major Rate Increases" (Sarasota Herald-Tribune Online, Monday, June 13, 2011).
The Computer Models at issue are not based on historical fact. If they were, they would reflect the actual experience in Central Florida with Hurricane Damage: 3 in 1 year (2004) and none other within living memory before or since.
Instead, this computer output is based on input of speculation and opinion. The opinion seems to be that the "Perfect Storm" could hit Orlando and if it did, the resulting Damage would be great, so before any such things happen let the Homeowner's Insurance Companies which paid for these selective Hurricane Computer Models, charge higher Premiums.
Hearings are reportedly required by Florida Law if Rates are based in part on unauthorized Computer Models. If Hurricane Computer Models are not authorized, then Florida Law provides Floridians with certain protections. With respect to any unauthorized Hurricane Computer Model filed as a part of any pending Rate Request, the author has provided the following letter concerning the applicable requirements of Florida Law to the Florida Office of Insurance Regulation (Department of Insurance), below.
Assume Good Faith Cap on Profit Intake From Health Insurance.
Blue Shield of California has announced a cap on "earning," the measure of which is not clear, and a "refund [of] the bulk of any excess income to its policyholders." Reed Abelson, "Insurer Says it Will Cap Profit Level" p. B1, col. 5 (New York Times Nat'l ed., Wed., June 8, 2011).
Perhaps other Health Insurance Companies will follow the lead. At this moment, assume this cap and announced refund are in Good Faith. They would alone be good news. More than that would be a bonus.
Health Insurance Premiums Control Proposals. It's the Economy Controls Everything.
Anthem Blue Cross, located in California, raised its Premiums by "up to 39%," it has been reported. In actuality, Anthem told the Los Angeles Times that the average increase for its Policyholders is "closer to 25%." Noam Levey, "Health Insurers Take Heat For Rise in Profits" (Los Angeles Times Online, Thursday, February 11, 2010).
In response, Secretary of Health and Human Services Kathleen Sebelius ended her silence on Healthcare Reform and issued an (undated) report pointing out a couple of things: (1) Increases in Health Insurance Premiums in 2009 "are five to 10 times larger than the growth rate in national health expenditures" and (2) executive payments and profits of Health Insurance Companies both increased dramatically in 2009, including at the parent company of Anthem, WellPoint Inc. which is based in Indianapolis, Indiana. Secretary Sebelius reported that executive payments to the "top executives" at the 5 largest Health Insurance Companies in the United States were paid "up to" $24,000,000.00 or $24 Million apiece while the same 5 largest Health Insurance Companies increased their profits 56% in 2009 from 2008, for total 2009 profits among them of $12,200,000,000.00 or $12.2 Billion. See also James Rowley and Nicole Gaouette, "Obama to Post Health Plan as Sebelius Renews Attack on Insurers" (Bloomberg.com, Friday, February 19, 2010).
It seems to be overlooked or minimized in all of these reports that Anthem Blue Cross in California issued Health Insurance Policies to individuals, not to employers. Most certainly, that fact has not been overlooked by Anthem's individual Policyholders in California who received Premium Increases. Their leverage with their Health Insurer is nowhere near as great as the leverage that large employers can bring to bear when Health Insurance Companies try to increase their Premiums. See, for example, Duke Helfand, "Consumers Who Buy Individual Health Policies Feel Trapped/They Have Few Options Other Than Dropping Coverage as Insurers Raise Rates and Slash Benefits. Insurers Blame the Soaring Cost of Medical Care and the Churn of Customers in the Individual Market" (Los Angeles Times Online, Friday, February 19, 2010).
Perhaps, with many employers dropping Health Coverage as a benefit for their employees in response to the unhealthy state of the economy and the consequent desire to cut costs at all costs, it is possible that "millions more workers [will be] forced to buy individual policies". Id.
This "possibility" does not seem like much of a "probability," however. "Companies care about how much total compensation they pay. Rising health costs generally come out of worker incomes, not company profits." David Leonhardt, "Economic Scene/On Eve of Health Meeting, Big Questions Still Linger" p. A1, col. 1 (New York Times Nat'l ed., Wednesday, February 24, 2010).
The choice that fired Employees are far more likely to face, then, is a difficult choice between two sets of very High Health Insurance Premiums: Premiums for individual Health Insurance Coverage, or Premiums for COBRA, the Federally required extension of Health Insurance Benefits for a certain time in exchange for increased Premiums to those who have lost their jobs and thus lost their Health Insurance. In the end, it's the economy that controls here. And it's the economy that will not be ignored if success is a desired outcome.
The Administration has announced a response to this situation, after highlighting Anthem's increased Premiums (without focusing on the fact that Anthem's Premium Increases are for individuals, who are largely left out of the pending Healthcare legislation in Congress) and after reporting on profits and executive pay at Health Insurance Companies (which issued Plans and Policies to employers, not to individuals like Anthem's Policyholders). In the face of Anthem's announced Premium increases, the Administration proposes Federal Regulation of the Health Insurance Industry. Its proposal includes a proposed Health Insurance Rate Authority which would pass on Health Insurance Premium increases, and expanded authority to be given to the Secretary of Health and Human Services "to oversee, and to potentially block, rate increases that are deemed unfair." Michael D. Shear and Dan Balz, "Obama Proposal Targets Insurance-Rate Increases" (Washington Post Online, Monday, February 22, 2010).
This is Mom-and-Apple-Pie kind of stuff. In the face of perceived unfair Premium Rate Increases, the Administration's proposal seems reasonable in response. It is the additional, unreported feature of a proposed Federal takeover of all Health Insurance Regulation that remains to be seen, and examined.
Thanks to the Los Angeles Times columnist Michael Hiltzik who points out in his column published today, that over the last two (2) years, WellPoint's average Health Insurance Deductible has risen by 20%.
Again, Please Read The Disclaimer.
COBRA Dying Out? Options for Health Insurance Coverage.
People losing the opportunity to pay huge Premiums for COBRA Health Insurance Coverage face a mixed blessing: They no longer face the huge Premiums demanded for COBRA, it is true, but people losing even their COBRA Coverage face the question of what options if any they have to obtain Health Insurance Coverage at all. Various options are explored by Sandra Block, "Losing Your COBRA Subsidy? You Have Health Insurance Options" p. 2B, col. 1 (USA Today, Tuesday, November 17, 2009). You and your clients may benefit from finding out about those options, especially so before COBRA runs out.
Concerns Rise With Healthcare Premiums.
Rising Healthcare Insurance Premiums have raised concerns. Reportedly, U.S. Senators and Members of Congress have sent a strongly worded letter to AHIP or America's Health Insurance Plans, a trade association of Health Insurance Companies. The letter asks for "'a detailed explanation of the planned rate hikes,'" it is reported by Reed Abelson, "Rising Premiums/Demanding Answers" p. A12, col. 5 (New York Times Nat'l ed., Saturday, November 21, 2009), not found online.
Employer-Based Group Health Insurance Options: Including Bad Faith?
Some of the ramifications of continuing the Health Insurance model of Employer-Offered Group Health Insurance Plans, are explored by David Lazarus, "Business Leaders' Opposition to Public Health Insurance Option Takes Chutzpah/Where do They Expect the Thousands of Workers They've Laid Off and Their Families to Get Coverage?" (Los Angeles Times Online, Sunday, November 1, 2009).
ERISA would seem to apply once Group Health Insurance Plans are in place and ready to be administered. ERISA offers a certain immunity from suit for conduct that in many jurisdictions would clearly be actionable as Bad Faith and Unfair Dealing. But what about before these Group Health Insurance Plans are even offered, chosen, and ready to be administered?
If Employers lay off workers in order to get out from under Health Insurance Premiums, or if that is even a factor in their budgeting process, what role if any is there for Duties of Good Faith and Fair Dealing? What legal basis, if any? Worth another look, by laid-off employees and their employers alike, perhaps.
Healthcare Reform: People's Premiums and Coverages Would be Changed.
A Public Health Insurance Option would change many Premium costs and broaden Coverages under Health Insurance Policies. There is no doubt whatsoever about those changes that would occur if a Public Health Insurance Option is enacted into law. The debaters in the tussle over a Public Option have been so distracting, however, that they have obscured two other truths that are emerging from the entire debate of Healthcare Reform.
People will almost certainly be affected by Increased Coverages and Regulation of Health Insurance. Whichever bill pending in Congress is enacted. See Kathy M. Kristof, "Personal Finance/How Healthcare Reform Affects Consumers" (Los Angeles Times Online, Sunday, October 18, 2009).

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