The U.S. Department of Justice has filed lawsuits to block the proposed mergers of four of the nation’s five biggest health insurers, reports The New York Times.

The proposed mergers involve Aetna and Humana, and Anthem and Cigna.

U.S. Attorney General Loretta E. Lynch said the proposed mergers “would leave much of the multitrillion-dollar health insurance industry in the hands of three mammoth insurance companies.”

“If these mergers were to take place, the competition among insurers that has pushed them to provide lower premiums, higher-quality care and better benefits would be eliminated,” she said.

“The companies responded by vowing, in varying degrees, to fight the government’s challenge,” report Leslie Picker and Reed Abelson. “Aetna, which had hoped to gain an advantage by being the first to reach a deal, aggressively defended its proposed merger, which it contended was different from the larger Anthem-Cigna deal that followed.”

Read the article.

A New Hampshire court has issued a decision on the duty to defend arising from an indemnity obligation in a design contract, distinguishing between the duty to defend often invoked for insurance coverage, from a duty to defend expressed in a contractual indemnity, writes Stan Martin of Commonsense Construction Law LLC.

The court found that an engineering firm owed a duty to defend the New Hampshire town that had hired the firm to design a wastewater treatment plant, from claims arising from the design against the town made by the contractor.

Martin describes the case and the arguments made by the parties. He concludes: “An explicit contractual duty to defend against allegations of negligence or breach by the indemnitor may well be construed to require such a defense from the outset, even when parties are still arguing over ultimate liability. And an indemnitor who has not been in breach of its contract up to that point may yet breach its contract by refusing to defend when required.:

Read the article.

National law firm Wilson Elser announced that a national insurance coverage team of 11 attorneys has joined Wilson Elser in three offices – Chicago, Los Angeles and New Jersey.

“Like Wilson Elser, this team’s insurance coverage practice is truly national in scope and reputation,” said Daniel J. McMahon, Wilson Elser chairman. “Their addition to the practice further deepens our already strong bench of attorneys in one of the firm’s core practice areas and will provide our clients with a wealth of experience in all facets of insurance coverage and bad faith matters.”

The team – led by partners Michael Duffy, Chicago; Paul White and David Simantob, Los Angeles; and Mark Vespole, New Jersey – primarily represents insurers in coverage matters, extra-contractual liability, bad faith and reinsurance matters. They previously were with Chicago-based law firm Tressler LLP.

They work on insurance coverage issues, draft insurance policy language, and litigate coverage and bad faith cases for general and specialty lines insurance and reinsurance companies.

The 11 are:

Chicago
Michael Duffy, Partner
Ashley Conaghan, Associate
Abigail Rocap, Associate

Los Angeles
Paul White, Partner
David Simantob, Partner
Linda Tai Hoshide, Partner

New Jersey
Mark Vespole, Partner
Joanna Crosby, Partner
Kathleen Williams, Partner
Katherine Tammaro, Partner
Matthew Major, Associate

Image by Wellness Corporate Solutions

Blue Cross and Blue Shield of North Carolina sued the federal government, becoming the latest health insurer to claim it is owed money under the Affordable Care Act, according to a report in The Wall Street Journal.

“The suit, filed on Thursday in the U.S. Court of Federal Claims in Washington, D.C., says the U.S. failed to live up to obligation to pay the insurer more than $147 million owed under an ACA program known as “risk corridors,” which aimed to limit the financial risks borne by insurers entering the new health-law markets,” reports Anna Wilde Mathews.

The insurer’s suit claims the federal government violated the language of the health law, as well as a contractual obligation.

Read the article.

In an article posted on their firm’s website, Matthew T. Furton  and Julie L. Young, partners in Locke Lord, discuss some recent rulings on arbitration by the U.S. Supreme Court, particularly as they apply to insurance and reinsurance.

The questions and answers discuss why the court has taken on more cases involving arbitration, which arbitration cases are currently under consideration by the court, why it matters that the circuits are split as to whether to stay or dismiss an action after compelling arbitration, and what the current state of the “manifest disregard” standard is.

Read the article.

Narrowly interpreting a policy’s breach of contract exclusion, a federal court judge in California ruled that the exclusion applied only to actual breaches of contract and that an alleged breach in the underlying complaint against the policyholder was insufficient to eliminate coverage, according to an article written by Amy B. Briggs, Christine Spinella Davis, Stephen T. Raptis,Robert H. Shulman and Susan P. White of Manatt, Phelps & Phillips, LLP.

Their article described the case:

A competitor filed suit against the insured, charging the policyholder with making disparaging comments so that its offer of employment would appear more attractive and “to solicit [the competitor’s] employees in breach of a written and implied contract.” The insurer rejected the policyholder’s request for defense, relying on a breach of contract provision in its commercial liability policy. But the court said the allegation was just that—an allegation—and not an actual breach of contract. Other policy exclusions used the term “actual or alleged,” the court noted, implying that the insurer knew how to include and elected not to use such language for the breach of contract provision.

Read the article.

Before entering into a construction contract, consider how force majeure events are evolving in today’s world, advise Jonathan Massell and David A. Senter of Nexsen Pruet on the firm’s website.

“In construction contracts, force majeure clauses include events such as “riots” and “acts of war” but courts have found that acts of terrorism did not fit those descriptions,” they write. “After the September 11th attacks, clauses utilizing “acts of terrorism” became more common, but courts have not directly interpreted the phrase and it has not been scrutinized judicially.”

Read the article.

The 5th U.S. Circuit Court of Appeals has affirmed a lower-court decision declining to broaden additional insured coverage afforded under a commercial general liability policy to energy operator Apache Corporation to contractual liabilities assumed by energy service provider Linear Controls, Inc., writes David J. Saltaformaggio of Phelps Dunbar.

The 5th Circuit “found that Apache was specifically named as an additional insured, not a named insured, and only named insureds are entitled to contractual liability coverage under a commercial general liability policy,” according to the article. “In so doing, the Fifth Circuit dismissed Apache’s arguments that the scope of its additional insured coverage should be expanded to include its named insured’s contractual obligations.”

Read the article.

Now more than ever, corporate directors are finding themselves named in lawsuits, says Katherine Henderson, veteran insurance board advisor and partner with Wilson Sonsini, in a video posted by Boardroom Resources LLC.

“Today, any major decision from the company or board level seems to result in some form of legal action,” Boardroom Resources says on its website. “All this increased litigation begs the question – what’s the level of personal liability for directors on public boards and how can their liability be mitigated?”

In the video, Henderson discusses the current state of board liability, along with what you need to know about your D&O policy. She also outlines what steps to take to mitigate your risk of being sued.

Watch the on-demand video.

A recent decision from the Northern District of Illinois illustrates the pitfalls that could arise from current insurance industry practices involving the issuance of privacy statements and insurance policies if done without the appropriate precautions, according to a report by Carol J. Gerner and Cinthia Granados Motley for Claims Journal.

“The process of issuing an insurance policy, either directly or through an employer group, requires care and deliberate action when it comes to issues of proper integration, documentation and transmittal,” they write.

“In Dolmage v. Combined Ins. Co. of Am., (No. 1:14-cv-3089, N.D. Ill. Feb. 23, 2016), the court denied the defense motion to dismiss a breach of contract claim based on a ‘Privacy Pledge’ document that was included in insurance policy documents provided to employees of Dillard’s department store (Dillard’s). The decision raises a novel theory by plaintiffs and warrants attention given the number of ‘privacy statements’ consumers receive in the mail every day from banks and credit card issuers and the use of third-party vendors in the management of personal data.”

Read the article.

By Mark Perkins
Perkins & Associates, LLC

In any instance involving the tragic loss of life or serious injury in commercial truck collisions, extensive discovery is required and one of the critical areas focuses on proof of hours of service violations. It then focuses on how the proof of chronic violation of hour of service safety regulations can provide the basis for proof not only of negligence, but punitive damages against the company and driver.

Where the driver’s log and grid show 3.5 hours driving time, but shows a route of 300 miles being covered, one can conclude:

• The driver has lied about the time he spent driving, or
• The driver was flagrantly speeding throughout his route (a truck obeying speed limits on highways will average 50 miles in an hour).

If a driver shows a 24-hour period of duty and begins with “driving” as the first entry, the driver has probably cheated on listing his duty time. It usually takes from 30-60 minutes for a driver to report to duty to the yard, get all of his paperwork, inspect his load, and perform the required inspections on his rig.

Where a driver logs 11 hours of driving time for the preceding 24-hour period and fails to get or log 10 solid hours of “off duty” time before resuming duty and driving, all of his driving for the following day is illegal and in violation of the safety regulations set forth in 49 C.F.R. 395.3.

Time and location of sequential fuel receipts can be important in showing the impossibility of compliance with the hours of service regulations in 49 C.F.R. 395.3.

Plaintiff’s attorneys investigating hours of service are suspicious that hours of service have been violated and records of driver’s duty status have been falsified until proven otherwise. In evaluating and defending claims for trucking companies, the defense attorney needs to THINK like his opponent.

Review and careful analysis  of the following documents helps cross reference criteria to check for validity or invalidity of driver’s duty hours:

1. Driver’s log as required by 49 C.F.R. 395.8 for the day of the collision.
2. Driver’s logs for defendant driver for the 6 months preceding the collision in question.
3. Graph Grid required by 395.8 (g) for that day and for the 6 months preceding the collision.
4. Records of automatic on-board recording devices required by 49 C.F.R. 395.15 for the day of the collision and the 6 months preceding.
5. All payroll, or payment logs, or records for that driver for the time period, including the collision and 6 months prior thereto.
6. All W-2’s for the driver in question for the withholding period, which includes the collision in question, and all reporting periods for 6 months prior thereto.
7. All fuel receipts incurred from the time the truck left the carrier’s premises until the time of the collision.
8. All Bills of Ladings and manifests pertaining to property transported and/or delivered from the time the truck left the carrier’s premises until the time of the collision.

The reason plaintiff’s attorneys ask for six months of logs is because of the belief that driver and company’s violation of hours of service regulations fall into a pattern. Examination of the logs and data for the prior 6 month period may  reveal those patterns. Where such patterns exist, an argument will be made of flagrant disregard of safety regulations, which “needlessly endanger” the general public (for those familiar with the “reptile theory” the phrase “needlessly endanger” is common).

The following post was written by a plaintiff’s attorney and is common refrain among plaintiff’s counsel:

49 C.F.R. Part 395 protects the public from the hazard of fatigued drivers operating huge trucks in their midst.  The hours of service regulations have been written from the blood of innocent citizens massacred by huge trucks at the hands of drivers impaired from fatigue.  Where a driver and carrier intentionally violate the safety regulations designed to guard against fatigue, they have shown a conscious disregard for the safety of the public using our highways.  Where such a fatigued driver has caused injury or death, the driver and carrier have acted with conscious and reckless disregard for the life and safety of the public on the highways.  This conduct justifies a punitive damage award against them, in addition to compensatory damages.

A bill approved by Congress on  Dec. 3, 2015 calls for a Federal Motor Carrier Safety Administration study on truck drivers’ long commutes and the safety hazards they present.

The $305-billion Fixing America’s Surface Transportation Act requires that  the U.S. Department of Transportation agency to track workforce commutes of two hours or more and provide an analysis of them in 18 months.

The section of legislation inserted into the potential new law is a direct result of the crash that almost killed former Saturday Night Live cast member Tracy Morgan. It states:

“Section 5515 requires the Administrator of the FMCSA to conduct a study on the safety effects of a motor carrier operator commuting more than 150 minutes. On June 17, 2014, a tractor-trailer struck a van near Cranbury, New Jersey, killing one person and injuring several others. According to the National Transportation Safety Board, the truck driver had been awake more than 24 hours at the time of the crash. In addition, the Georgia-based driver had driven 12 hours overnight to his job in Delaware before starting his shift. The study shall address the prevalence of long commutes in the industry and the impact on safety.”

If you’re a trucking defense attorney and you don’t evaluate the case like a plaintiff’s attorney would, you are not providing diligent representation.

If   you’re a trucking company or insurance company and you get offended by your legal representative diligently looking for problems and thinking like his opponent, you need to get over it. Your defense attorney is trying to help your company survive and thrive in this litigious society.  Be grateful that your legal counsel is a looking for problems. It’s better to know in advance than to be surprised.

The 6th U.S.  Circuit Court of Appeals has issued a sweeping decision that confirms that “ordinary principles of contract law” rarely will require a company to freeze outdated lifetime health coverage benefits in place, write Nancy G. Ross and Brian D. Netter, partners in Mayer Brown.

“Until recently, courts had a practice of interpreting benefits arrangements in collective-bargaining agreements (‘CBAs’) to ensure lifetime coverage—often defying the company’s expectations in the process,” they write. “But the legal environment has changed. Now is the time for companies to press ahead in reducing legacy costs on their balance sheets.”

They discuss the case of Gallo v. Moen Inc., in which a class of retirees who had worked at a shuttered Ohio factory alleged that they had been promised lifetime health benefits.

Read the article.

Zenefits cofounder Parker Conrad resigned as CEO and as a director of the company, according to a Forbes report, as questions are being raised about the steps Conrad took to put Zenefits into hypergrowth – including flouting laws about who is allowed to sell insurance.

“COO David Sacks, formerly of PayPal, now steps into the CEO job at Zenefits,” the report says. “In an email sent to employees, he admitted the company has taken too many wrong steps. ‘We sell insurance in a highly regulated industry. In order to do that, we must be properly licensed. For us, compliance is like oxygen. Without it, we die,’ he wrote. ‘The fact is that many of our internal processes, controls, and actions around compliance have been inadequate, and some decisions have just been plain wrong. As a result, Parker has resigned.’”

Read the article.

U.S. drugmaker Merck & Co. on Friday said it would pay $830 million to settle a federal class action lawsuit involving allegations the company failed to adequately inform investors about heart risks from its now-recalled Vioxx pain medication, according to a report on the Business Insurance website.

“The drug was approved by U.S. regulators in 1999 as a new type of treatment for pain and quickly became a blockbuster product, ultimately used by an estimated 20 million Americans,” according to a Reuters report. “But the company in 2004 recalled Vioxx from the market after a colon-polyp prevention study showed it more than doubled the risk of heart attacks or stroke after 18 months of use.”

The company’s cash payment for the settlement and fees will be about $680 million after reimbursement from insurance policies, Merck said.

Read the article.

The typical reinsurance contract arbitration involves a tri-partite panel of arbitrators, with each party appointing an arbitrator and a separate process governing appointment of the third arbitrator (known as “the umpire”),” according to a white paper published by Sidley Austin LLP and available on Lexology.com.

Most arbitrations run smoothly, the paper says, but “arbitrators should be ready for the exceptional case, which can be occasioned by another arbitrator or counsel. The remedy for rogue behavior may rest within the panel, or it may require judicial intervention. Judicial relief can be hard to come by, given the procedural and substantive hurdles to be cleared; but the truly egregious case has a way of catching a court’s attention.”

The article examines some examples of panel breakdown and how they have been addressed.

Read the white paper.

An article by Stephen J. Bagge in the Carlton Fields PropertyCasualtyFocus blog describes an Eleventh Circuit’s ruling that provides persuasive language for applying contractual liability exclusions under D&O policies to alleged business torts that are related to or dependent on the existence of contractual liability.

“This is significant, in that plaintiffs are increasingly seeking insurance coverage for contractual disputes,” Bagge writes. “As the court’s opinion demonstrates, D&O policies are not intended to insure contracts entered into by insureds: that is why D&O policies routinely contain contractual liability exclusions.”

The case was Bond Safeguard Ins. Co. v. National Union Fire Ins. Co. of Pittsburgh, Pa., No. 14-15233 (11th Cir. Oct. 5, 2015), in which the plaintiff sought to recover payments it had made under certain surety bonds.

Read the article.

The insurance relationship is contractual, but when policyholders claim insurers failed to honor their obligations, they typically invoke the tort of “bad faith,” writes Robert D. Helfand of Carlton Fields Jorden Burt.

“When courts try to explain this anomaly, they cite features of insurance making it uniquely important that parties respect each other’s interests. Courts often say these features make the duty of good faith ‘reciprocal,’ ” he explains.

He discusses some cases that provide another reason for asserting that the insured’s bad faith injured the insurer in ways that were foreseeable when the contract was made. Even if the argument falls short, it might still create a basis for reducing the insurer’s exposure.

Read the article.

In a new article on Lexology.com, Jonathan Reich of Womble Carlyle Sandridge & Rice LLP discusses the difference between an insurance policy with a deductible compared to one with a self insured retention (“SIR”) and how that impacts business contracts.

“Deductibles and SIRs are often conflated; the differences are poorly understood by those outside of the insurance industry as well as the practical implications,” he writes. “Two policies can have a $1 million limit, with the only difference between the two policies being that one has a $100,000 deductible and the other a $100,000 SIR.”

He explains the differences, but adds that these simple distinctions have stark real-world implications.

Read the article.

Good attorneys constantly evolve their contract provisions, but contract evolution hates to discard pieces that were once useful, writes J. Benjamin Patrick of Gordon & Rees LLP in an article published on Lexology.com. The tendency to keep these pieces can result in a contract having the equivalent of the human appendix: a piece no longer of any positive use and that harbors the potential for harm.

For example, outdated contract provisions linger in the “standard form” contracts used by many contractors and owners, he writes. “The presence of such a provision in your standard contract is a sign that some additional evolution is necessary in order to bring your contract up to current laws, standards, and industry practices.”

Read the article.

Insurers in the United States will face competing priorities for resources and time over the next 12 months, with cyber security preparedness challenging overall regulatory compliance readiness, argues Wolters Kluwer Financial Services and reported by Canadian Underwriter.

Wolters Kluwer Financial Services surveyed more than 300 insurance professionals in 2014 and 2015, tracking 10 factors across two consecutive 12-month periods to illustrate the overall level of regulatory and risk management pressures facing U.S. insurers.

“Overall, 60% of polled insurance professionals report that cyber security will receive escalated priority at their organization, followed by regulatory risk at 42%, notes a statement from the company, which offers risk management, compliance, finance and audit solutions and maintains operations in more than 170 countries,” reports Canadian Underwriter.

Read the report.