California Insurance Litigation Blog

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173).  The Act directs the U.S. Treasury Department to create a Federal Insurance Office ("FIO")  The FIO has the authority to monitor all aspects of the insurance industry, establish Federal policy on international insurance matters, serve as a liaison between the Federal government and the several States regarding insurance matters, and serve as an advisory to the Treasury regarding the export promotion of United States insurance products and services.  The scope of the FIO's authority extends to all lines of insurance, except health insurance.  Also excluded from the FIO's authority is long-term care insurance, except long-term care insurance that is included with life or annuity insurance components. 

This is a departure from an earlier bipartisan proposal by Congressmen Ed Royce (R-Calif.) and Melissa Bean (D-Ill.) that would have enacted a federal insurance charter designed to mandate a national framework of state based regulation or market conduct, licensing, the filing of new products and reinsurance. 

The FIO is seen as a "win" by many State Insurance Commissioners who had been advocating for closer collaboration with the federal government in the regulation of insurance companies. 

Dodd-Frank Wall Street Reform and Consumer Protection Act

Last month, the U.S. Supreme Court handed ERISA plan participants a big victory when they decided the important ERISA disability case of Hardt v. Reliance Standard Life Insurance, __ U.S. __ (Decided May 24, 2010)(see our blog discussion here) holding that an ERISA plan participant may be able to collect attorneys’ fees from a plan or claim administrator without obtaining a judgment in the action.  It did not take long for the Ninth Circuit Court of Appeals to apply Hardt.  In Simonia v. Glendale Nissan/Infiniti Disability Plan, __ F.3d __ (9th Cir. June 24, 2010), the court rejected a plan participant’s claim for attorney’s fees.

In Simonia, Aleck Simonia became physically disabled due to a herniated disc.  He had disability insurance under his employer's group insurance plan, which was ultimately insured by the Hartford Insurance Co.  Hartford concluded that Simonia was no longer physically disabled but had a mental disorder subject to his ERISA plan's twelve-month payment limit.  Hartford also learned that Simonia had been awarded $1,551 per month in Social Security Disability Insurance (“SSDI”) benefits retroactively, which should have been offset against his payments from Hartford.  Thus, Hartford informed Simonia he would be receiving payments subject to the plan's twelve-month mental disorder limit and that he owed Hartford $22,310.

Simonia sued Hartford for improperly reclassifying his disability as a mental disorder.  Hartford filed a  counterclaim to recover its overpayment.  Simonia informed Hartford that the Social Security Administration had retroactively reduced his SSDI award, and he requested that Hartford recalculate the alleged overpayment.  The parties later settled the counterclaim and stipulated to its dismissal. Simonia did not prevail in his claims against Hartford for continuing benefits.  Simonia thereafter filed a motion seeking $63,745 in attorney’s fees because he “was successful as a counter-defendant in that the defendant dismissed its counterclaim.”