When you purchased your home about 10 years ago it was the home of your dreams. Like so many other responsible homeowners, the first thing you did was purchase a home insurance policy. However, recently, the home of your dreams was damaged and needs to be repaired. When you call to notify your insurance carrier of the damage, they inform you they are not responsible and will not pay for the damage and that you will have to pay for the repairs. What do they mean they will not pay? What can you do about it?
Some insurance companies offer lifetime disability benefits. They usually come at an additional fee (or premium) and are attached to the policy as an "endorsement" or "rider" to the policy. But not all lifetime coverage is created equal. Some policies - usually those that were issued in the 1980's or 1990's - merely continue your benefits for life without any restrictions or limitations. Benefits under these policies can even increase over time pursuant to a Cost of Living Adjustment (COLA) provision. These policies offer the broadest possible coverage. Other policies are not so generous. Their coverage may be contingent on when you become disabled or the type of disability that you are suffering from. For instance, some policies provide reduced benefits if you are disabled after age 60. Others provide for reduced benefits if you are disabled as a result of a sickness rather than an injury. The point: it pays to read your policy and know your rights.
Earlier this year, the Supreme Court provided additional guidance on punitive damage awards in insurance bad faith actions. The decision, Thomas Nickerson v. Stonebridge Life Insurance Company (June 9, 2016) 63 Cal.4th 363, held that the ratio of punitive damages must include an award of Brandt attorneys' fees in its calculation. Nickerson involved a denial of medical benefits under an indemnity policy. The insured was a paraplegic who broke his leg when he fell from his wheel chair. He was hospitalized for a total of 109 days, but his insurer only paid benefits for 18 days, and denied coverage for the remainder without speaking with his doctors. The insured filed suit. At trial, he was awarded an additional $31,500 in benefits, $35,000 in emotional distress damages, and $19 million in punitive damages. The parties also stipulated to an award of Brandt attorneys' fees in the amount of $12,500. The trial court then reduced the punitive damages award from $19 million to $350,000, reflecting a single digit ratio based on the $35,000 emotional distress award only, citing State Farm Mutual Automobile Ins. Co. v. Campbell (2003) 538 U.S. 408. The Supreme Court disagreed with the calculation. It held that the Brandt fee award must also be taken into account when calculating punitive damages because it is an item of compensatory damage.
The state of California has proposed changes to insurance jury instructions. The impact of these changes could have a negative effect on consumers.
Most of us are covered by disability policies through our employers. Premiums are paid by payroll deductions and coverage is described in a summary plan description. Those policies (subject to a few exceptions discussed below), are governed by federal law, specifically, the Employee Retirement Income Security Act of 1974 ("ERISA"). These laws provide strict requirements for appealing a claim denial, as well as limited remedies for those whose disability benefits are wrongfully cutoff by their insurance carrier. No matter how misguided an insurer's decision is, the only remedy for insureds under ERISA is (1) the payment of past disability benefits owed by the carrier and (2) the possible recovery of attorneys' fees. In most circumstances, nothing else is recoverable.
As a homeowner, you know that you have to have insurance to protect your asset. Your home is a significant investment, and you have to make sure you have coverage if something happens that results in a catastrophic loss.
You did everything right: you promptly submitted your claim to the insurance company, dutifully documented the facts surrounding your claim, obtained supporting evidence, completed all the insurance company's forms, and were always responsive to the insurer's claim handlers. Yet you just received a letter from the insurer notifying you that your claim is denied. That letter probably contains a notice that you "may" appeal the denial by submitting an appeal to the insurer. But why should you go to the effort of preparing an appeal to a company that's already indicated a bias toward your claim? It seems counterintuitive. Besides, the insurance company says you "may" appeal, doesn't that mean it's not mandatory?
If you were to ask someone to name the biggest meteorological threat California faces, years ago they would likely have replied, "Earthquakes". However, in recent years, the two threats that top the list are the related issues of drought and wildfire.