Shawn E. McDermott - Blog

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The President recently signed into law an economic stimulus package titled The American Recovery and Reinvestment Act. This law may impact your health care and other employee benefits. The plan includes provisions to assist certain eligible jobless workers pay for health insurance under COBRA. COBRA applies to employers with 20 or more employees and, specifically allows newly unemployed workers to keep health insurance provided by their former employers. The new American Recovery and Reinvestment Act makes COBRA coverage more accessible to former employees.

For workers who are involuntarily terminated for reasons other than gross misconduct between September 1, 2008 and December 31, 2009, the federal government will subsidize 65% of the premiums under COBRA for nine months. Additionally, for involuntarily employees who did not sign up for COBRA originally have been granted an additional 60 days within which to do so.

There is a high income exclusion however. If your adjusted gross income exceeds $125,000 per year or $250,000 per family, the income tax will be raised by the premium reduction amount which effectively removes the subsidy.

If you have lost your job involuntarily in this economic downturn, it is possible your rights under COBRA have been impacted. You may want to contact your employer to determine if you have the right to enroll in COBRA healthcare coverage or have the right to seek a subsidy under this new Act.

The U.S. Congress and our newly inaugurated President Obama signed into law this morning the Lilly Ledbetter Fair Pay Act. This new law is a clear repudiation of the conservative Supreme Court’s ruling last year in Ledbetter v. Goodyear which many legal scholars agree wiped out years of employment law precedence on equal pay provisions. While my law office emphasizes representing clients with employee benefit claims, as compared to the equal pay, wrongful termination and discrimination suits seen in the broader practice of employee rights, this new law is still worthy of mention.

Ms. Ledbetter is a former employee of Goodyear Tire and Rubber Company in a plant located in Gadsden, Alabama. She worked there for more than 19 years (more…)

The American Association for Justice (formerly the Association of Trial Lawyers of America) recently released a new report on the insurance industry titled “Tricks of the Trade: How Insurance Companies Deny, Delay, Confuse and Refuse.” The report reviews some of the egregious ways the industry attempts to make large sums of money at the expense of their insureds, the consumer. The report details six methods that directly impact policy holders. It identifies the insurers who are engaging in these practices. Finally, it reviews what each consumer can do to resist these tactics. Review the AAJ report by clicking here.

The Law Office of Shawn E. McDermott LLC recently won a Colorado appellate case on behalf of its clients relating to uninsured/underinsured (UM/UIM) automobile insurance benefits. In this case, our clients, the Meza family members, had pursued a wrongful death claim under six different underinsured motorist policies issued to various family members of the Meza family. The claims were based on the tragic death of the family matriarch, Lucia Meza, who died in an automobile accident in 2000.

This insurance coverage denial case was initiated in 2002 by State Farm Insurance against the Mezas and three other insurance companies including Farmers, American Family and American Standard. Each of these carriers had denied the UIM claims of the Meza family members for a variety of reasons. The claims against State Farm and Farmers were resolved a few years ago. The final piece of the puzzle against American Family and American Standard was placed by the Colorado Court of Appeals with its decision on July 3, 2008 which affirmed the decision of the trial court from two years earlier. These two companies had improperly and in violation of public policy defined the term “relative” in its insurance policies in such a way to violate Colorado law. After six years of litigation, the Court of Appeals finally agreed with the legal arguments put forth by the Mezas and our office.

As the case was not published pursuant to Rule 35(f) of the Colorado appellate rules, it is reproduced below for interested readers: (more…)

On July 31, 2008, Unum Group announced its second quarter results for 2008 which included a net income of $240 million, representing a significant increase over its net income for the similar quarter in 2007 of a mere $153 million. Included within its domestic operating segment, Unum’s its group disability line of business reported operating income of $45.7 million for the quarter, a three fold increase over its income reported for 2007. It appears quite obvious that Unum continues to be an extremely profitable insurance company.

A few years back, the companies that make up the Unum Group were the subject of a multi-state market conduct investigation conducted by the various attorneys generals throughout the country given Unum’s alleged inappropriate handling and payment of disability income benefits. The investigation resulted in a settlement under which Unum voluntarily agreed to pay a fine of $15 million and to re-evaluate over 200,000 previously denied and terminated disability benefit claims. Despite this regulatory settlement, and Unum’s re-assessment of these denied claims, which continues to this day, Unum remains a highly profitable company. At last check, Unum’s stock price on the NYSE is the highest it has been since January 2000.

It goes without saying that an insurance company’s profit is derived from paying out fewer dollars in claims to insureds than the company receives in premium payments. The claims process should not take into account the profitability of the company but it can, and does. If you have been denied your claim for disability or other insurance benefits, feel free to contact us for a review of your situation.

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On June 27, 2008, the United States Supreme Court denied review in the case of Amschwand v. Spherion Corp., No. 07-841. In this author’s opinion, the Supreme Court should have accepted cert, and should thereafter have overturned the lower court’s decision in the case.

The question presented in Amschwand was whether an action by a plan beneficiary against a plan fiduciary for monetary relief equal to the insurance benefits that the beneficiary would have received absent the fiduciary’s breach of fiduciary duties seeks “equitable relief” within the meaning of ERISA §502(a)(3). To understand the question presented, a review of the facts is necessary. Mr. Amschwand was employed by Spherion Corp. and was a participant in Spherion’s group life plan, which was insured by Aetna Life Insurance Company. In 1999, Amschwand was diagnosed with cancer and took leave from his job. (more…)

On June 19, 2008, the Supreme Court issued its decision in Glenn v. Metropolitan Life Insurance Co., No. 06-923, 2008 WL 2444796. The Court was asked to address the issue of the conflict of interest which exists when the entity that administers an ERISA plan, such as an insurance company, is also the entity which pays the benefits out of its own pocket. The Supreme Court confirmed that a conflict of interest exists in such a situation and the court must consider the conflict or at least be “weighed as a factor” in determining whether the denial of an employee’s claim for benefits was proper. The court in Glenn found that MetLife, as plan administrator, engaged in a dual role of both evaluating and paying benefit claims which creates the kind of conflict of interest previously referred to in the Supreme Court’s decision of Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). Unfortunately, the ERISA statutory scheme failed to contain an express standard of review for the courts to follow in reviewing a beneficiary’s denied claim. Pursuant to Firestone, the court found that a denial of benefits challenged under ERISA § 502(a)(1)(B) must be reviewed under a de novo standard unless the benefit plan expressly provides the plan administrator or fiduciary (often times the insurance company) with discretionary authority to determine eligibility for benefits or to construe the plan’s terms, in which case a deferential (or arbitrary and capricious) standard of review would be appropriate. Ever since the court’s ruling in Firestone in 1989, the district and circuit courts have struggled with the proper application of this arbitrary and capricious standard of review. The hope was that the Supreme Court would clarify the appropriate standard of review in those case where discretionary authority had been granted to a fiduciary and such fiduciary was acting under a conflict of interest. The new Glenn v. MetLife decision clarifies this approach somewhat and, in this author’s opinion, serves to overturn the 10th Circuit’s approach as set forth in Fought v. Unum, 379 F.3d 1997 (10th Cir. 2004). (more…)

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We just learned this morning that Governor Ritter signed into law House Bill 1407 yesterday afternoon which has the ability to dramatically assist beneficiaries/insureds of insurance contracts, including those governed by ERISA. Generally speaking, the bill provides specific rights and remedies to insureds under insurance contracts whose claims have been unreasonably delayed or denied. Specifically, such a finding can result in the recovery of reasonable attorney’s fees and up to two times the actual damages sustained. See C.R.S. §10-3-1116, as now amended.

Additionally, the law bans the use of “discretionary clause” provisions within any insurance policy, including group policies. (more…)

A nice win in a case against Standard Insurance and PERA.

On Friday, May 16, 2008, the Colorado Court of Appeals issued a decision of first impression which addresses Standard Insurance Company’s long pursued argument that it is entitled to governmental immunity in administering claims for disability retirement benefits for the Colorado Public Employees Retirement Association (PERA). Our office has handled many of these claims and faced this argument by Standard on more than one occasion. Until now, the Court of Appeals had not been presented with the legal question of immunity, but, now that it has, it has answered the question correctly. Standard Insurance does not have immunity and may be sued directly.

In the case of Moran v. Standard Insurance Co., No. 06CA2081, the Plaintiff appealed the trial court’s finding that Standard was an “instrumentality” of PERA and (more…)

Often times, both potential clients and inexperienced attorneys will contact our office and are surprised to learn that insurance bad faith claims cannot be pursued when a group insurance policy is governed by Employee Retirement Income Security Act of 1971 (visit our ERISA disability and health insurance claims page for a more detailed summary of “ERISA”). A group insurance policy obtained through an employer, such as a long term disability income replacement policy, looks like an ordinary policy but is not treated as such in the eyes of the law. That is because it is a group policy provided to an individual by his or her employer, and is thus governed by ERISA. (more…)