California Insurance Litigation Blog

Insurance Commissioner Dave Jones marked his first full year in office this week by looking back on the California Department of Insurance’s (CDI) major accomplishments during 2011.  Some of these achievements were very important for insurance consumers.  Here’s what his press release said:

“A little over a year ago, I took my oath as Insurance Commissioner and pledged to make my Administration one of action,” Commissioner Jones said. “I can confidently and proudly say that the Department has fully lived up to that pledge. We have achieved a number of critical successes on behalf of California’s consumers consistent with our vision to be the most effective consumer protection agency in the nation.”

The insurance industry is unique in California and in most states: unlike other industries, it is required to act in good faith (known as the covenant of good faith and fair dealing) with its insured customers.  The California courts have long held that insurers have a special relationship, in the nature of a fiduciary relationship, that requires them to act with regards to their interests in a manner equal to the interests of their policyholders.

The Huffington Post, in a very interesting article entitled, “Insurance Claim Delays Deliver Massive Profits To Industry By Shorting Customers” reports that since the mid-1990s, “a new profit-hungry model, combined with weak regulation, has upended that ancient social contract” between insurers and claimants. 

What Are the Advantages of Buying Disability Insurance?  What Should You Be Looking for in a Disability Policy?  McKennon│Schindler LLP partner Robert J. McKennon has been litigating disability insurance claims for over twenty-five years and gives his advice on buying disability insurance.

In a recent decision, the Ninth Circuit Court of Appeals ruled that ERISA does not preempt causes of action based on unfair insurance practice claims brought under Montana’s Unfair Trade Practices Act.  However, the Court did find that Montana’s so-called “little HIPAA” was preempted by federal HIPAA, which is part of ERISA. 

In Fossen v. Blue Cross and Blue Shield, __ F.3d __ (9th Cir. October 18, 2011), the Court considered an appeal from a District Court ruling that entered summary judgment in favor of Blue Cross on two causes of action.  Plaintiffs – which consisted of three brothers, their corporations and a partnership of the three corporations – sued Blue Cross after the health insurer increased their premiums by over 40%.  The lawsuit, filed in state court, alleged two causes of action:  violation of Montana Code Annotated § 33-22-526(a) (also known as Montana’s “little HIPAA” statute) and violation of Montana Code Annotated § 33-18-101 (also known as Montana’s Unfair Trade Practices Act).  Plaintiffs alleged that premium increase violated little HIPAA’s prohibition against imposing a “premium or contribution that is greater than the premium or contribution for a similarly situated individual” on account of "any health status-related factor of the individual” and the Unfair Trade Practices Act’s prohibition against “unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of premium, policy fees, or rates charged.”  The action, filed in state court, was removed to the District Court, which eventually granted Blue Cross’ motion for summary judgment as to all causes of action.

On October 12, 2011, the McKennon | Schindler law firm won a complete defense verdict on a $2 million successor liability claim against their client, Elephant Talk Communications Corp., in a case called Chong Hing Bank Limited v. Elephant Talk Communications, Inc., Orange County Superior Court Case No. 30-2009-00328467. 

Chong Hing Bank Limited (Bank), a Hong Kong financial services company, began making loans to Elephant Talk Limited (ETL), a Hong Kong telecommunications company, beginning in 1996.  In 2002 ETL reverse acquired a California public shell company called Staruni Corp. in a stock-for-stock exchange in which Staruni became the parent company and ETL became its wholly-owned subsidiary.  Staruni changed its name to “Elephant Talk Communications, Inc.” (Elephant Talk) in connection with the reverse acquisition.