Mass. Appellate Division holds that preclusion of insurer's experts as sanction for nonproduction of documents violated due process

Advanced Spine Centers sued Commerce for PIP and 93A damages. In discovery it sought a number of documents, including reports written by Commerce's proposed experts in other cases. Commerce produced copies of reports of its proposed experts for the case at hand, but asserted that it had no other reports in its possession, custody or control.

Advance moved in limine to preclude the experts from testifying because Commerce had not provided the requested reports. The trial court allowed the motion.

In Advanced Spine Centers, Inc. v. Commerce Ins. Co., 2012 WL 2153943 (Mass. App. Div.), the Massachusetts Appellate Division overturned that ruling, holding that the sanction was too broad and violated the principles of due process.

Fourth Circuit Rules in Favor of Insurer That Refused to Defend or Indemnify Trucker

Finds “Business Use” Exception to the Policy Applies to Bar Coverage for Accident While Under Dispatch

On June 27, 2012, in an unpublished opinion, the United States Court of Appeals for the Fourth Circuit ruled in favor of an insurer that refused to defend or indemnify a trucker based on the commercial auto insurance policy’s “business use” exception, affirming a decision of the United States District Court for the District of Maryland.  

Post by Logan Wells

In Forkwar v. Empire Fire and Marine Insurance Company, Hameed Mahdi was a contractor for J&J Logistics, Inc. (“J&J”), working under an independent contractor agreement. Madhi leased his tractor to J&J, which paid Mahdi for its exclusive use of the tractor. J&J’s ICC numbers and the name “J&J Logistics” were on Mahdi’s tractor. Pursuant to the contract, Mahdi called J&J’s office each morning to see if J&J had a job for him to do. On November 25, 2004, Mahdi called J&J and was instructed to pick up a load in Jessup, Maryland at midnight on November 26. Mahdi left his home on November 26 and began to drive to Jessup. On the way, Mahdi decided to stop to grab something to eat, but before he could exit the highway he was involved in a collision with Augustine Forkwar.

Mahdi had been issued a commercial auto insurance policy by Empire Fire & Marine Insurance Company (“Empire”). After receiving notice of the accident, Empire conducted an investigation and determined that the “business use” exception to the policy applied, relieving Empire of any obligation to defend or indemnify Mahdi for the accident. The business use exception provided as follows:

This Insurance does not apply to any of the following . . .

14. BUSINESS USE

“Bodily injury” or “property damage” while a covered “auto” is used to carry people or property in any business or while a covered “auto” is used in the business of anyone to whom the “auto” is leased or rented.

Forkwar filed the underlying suit against Mahdi and J&J in October of 2006, alleging Mahdi negligently caused injury to Forkwar and that J&J was liable under the doctrine of respondeat superior. Empire declined to defend Mahdi on the basis of the business use exception. During the trial, J&J moved for a judgment as a matter of law as to the claims against it, which Forkwar did not oppose. Later, the jury found that Mahdi was negligent in the operation of his vehicle and awarded Forkwar $180,756.67.

After securing judgment against Mahdi in state court, Forkwar filed the action against Empire. The action was removed to federal court, and the parties filed cross-motions for summary judgment. The district court denied Forkwar’s motion for summary judgment, granted Empire’s motion for summary judgment, and denied Forkwar’s counter motion for summary judgment. Forkwar appealed arguing (1) Empire was collaterally estopped by the judgment in the underlying action from arguing that the business use exception applied; and (2) the business use exception did not bar coverage.

Collateral Estoppel

Forkwar argued Empire was collaterally estopped from claiming the business use exception applied because the issue of J&J’s respondeat superior liability was litigated and decided in the underlying action. The court disagreed, finding Forkwar could not meet her burden because the issue in the underlying action was not identical to the one presented in the action in question:

Under Maryland law, the doctrine of respondeat superior permits “an employer to be held vicariously liable for the tortious conduct of its employee when that employee was acting within the scope of the employment relationship.” Oaks v. Connors, 660 A.2d 423, 426 (Md. 1995)....[T]here are four elements to establish respondeat superior in Maryland: (1) the existence of an employer-employee relationship; (2) the tortious act must have occurred “within the scope of the employment relationship;” (3) the employer consented, explicitly or implicitly to the use of the automobile; and (4) the employer had the right to control the employee in the operation of the automobile or the use of the automobile was vitally important in furthering the master’s business.

In contrast, the business use exception applies whenever “a covered ‘auto’ is used to carry people or property in any business or while a covered ‘auto’ is used in the business of anyone to whom the ‘auto’ is leased or rented.” Plainly, the respondeat superior doctrine and the business use exception are not identical issues. While respondeat superior requires the existence of an employer-employee relationship, the business use exception has no such element. Thus, an individual like Forkwar who was acting “in the business of” J&J but who is an independent contractor rather than employee would be subject to the Policy’s exclusion without falling under the doctrine of respondeat superior.

In so finding, the court specifically addressed the Court of Special Appeals of Maryland’s language in Empire Fire & Marine Ins. Co. v. Liberty Mutual Ins. Co., 699 A.2d 482 (Md. Ct. Sp. App. 1997), wherein the Court of Special Appeals stated in construing Empire’s business use exception that it would “follow the course of other courts that have sought guidance from the analogous common law doctrine of respondeat superior.” Acknowledging there were some similarities in the requirements for the business use exception and the elements of respondeat superior, the court rejected the notion that the elements were identical:

It is true that the requirement in the business use exception that bodily injury occur while an auto “is used in the business of anyone” is quite similar to the second element for respondeat superior, that the accident occur “within the scope of the employment.” However, that is not to say that all of the elements are identical. Respondeat superior requires that there be an employer-employee relationship, and Maryland -- like other states -- recognizes a distinction between an employee and an independent contractor. See, e.g., Greer Lines Co. v. Roberts, 139 A.2d 235 (Md. 1958) (“Whether the relation of the parties is that of master and servant, or employer and independent contractor, depends upon the facts . . . .”). In contrast, no language in the business use exception suggests there must be an employer-employee relationship; it requires only that the accident occur while the auto is used in someone’s business. Thus at best Appellant has proven that one of the four elements of respondeat superior are met, but cannot establish the remaining three.

Accordingly, the court rejected Forkwar’s collateral estoppel claim.

Business Use Exception

Forkwar also argued the business use exception did not apply to the underlying action, arguing that Empire Fire & Marine Ins. Co. v. Liberty Mutual Ins. Co., 699 A.2d 482 (Md. Ct. Sp. App. 1997), was dispositive. The court disagreed, noting the timing of the accident in Liberty Mutual was different than the one involving Forkwar and Mahdi:

In ... Liberty Mutual ... the plaintiff, James Perry, was the owner and operator of a tractor that was contracted out to a shipping company, O.S.T.; the tractor’s I.C.C. license was in O.S.T.’s name. O.S.T. also had a similar method of assigning work: Perry contacted O.S.T. daily to obtain his next assignment. The timing of the accident, however, is different: Perry had completed his dispatch on January 16, dropped his tractor off at a service station that day, and returned four days later to pick it up. On his way home from the service station, he was involved in an accident. The Maryland court found that the business use exception did not apply, noting that Perry was driving to his home, not receiving any compensation from O.S.T., not operating under a bill of lading, not under dispatch, and not hauling a load at the time of the accident.

... While most of the facts parallel the instant case, in Liberty Mutual the accident occurred several days after the completion of Perry’s last dispatch, while he was driving home. Here, in contrast, Mahdi was under dispatch -- a fact expressly noted in Liberty Mutual.

(Internal citations omitted).

Lamenting the lack of additional case law on the applicability of the business use exception, the court sought guidance from outside the Fourth Circuit. Accordingly, the court followed the reasoning of the Seventh and Fifth Circuits, see Mahaffey v. Gen. Sec. Ins. Co., 543 F.3d 738 (5th Cir. 2008); Empire Fire & Marine Ins. Co. v. Brantley Trucking, Inc., 220 F.3d 679 (5th Cir. 2000); Hartford Ins. Co. v. Occidental Fire & Cas. Co., 908 F.2d 235 (7th Cir. 1990), and analyzed whether Mahdi’s conduct at the time of the accident “furthered the commercial interest” of J&J:

In applying the furthering-the-interests test to this case, we find that Mahdi’s conduct fell under the business use exception. The accident occurred while Mahdi was on his way to pick up a load for J&J; his driving to Jessup was a necessary step in completing his work. As the district court noted, Mahdi was not “pursuing leisurely engagement nor engaged in some frolic [or] detour.” Rather, he had received instructions from J&J to go to Jessup to pick up a load and was in the process of completing that task. Although Mahdi had decided just before the accident to stop for a meal before making his way to the warehouse, he was operating his vehicle at the time of the accident solely for the purpose of furthering J&J’s commercial interests.

The court therefore found that the business use exception applied to bar coverage, thereby affirming the decision of the district court.

What was at stake in the ruling for Washington state

Earlier this month, we put out a report detailing what was at stake for Washington state -- down to the county level -- if the Affordable Care Act was thrown out by the Supreme Court.

The upshot was that more than 800,000 Washingtonians stand to get coverage through the Medicaid expansion OR to get subsidies to help them and their families pay for private insurance.

In addition, the report details the reforms, most of them largely unnoticed by the average person, that have already taken effect. Among these: Young adults can now stay on their parents' health coverage up to age 26, kids can't be denied insurance because they're sick, small businesses get tax rebates if they provide health coverage for workers, no caps on lifetime benefits, etc.

The most significant reforms will take place in 2014, including the state's new health care exchange, an online marketplace to shop for and compare insurance -- as well as a way for lower- and middle-income families to get substantial help paying for it.

The full report is at http://www.insurance.wa.gov/legislative/reports/Whats-at-stake.pdf.

Kreidler reaction to Supreme Court upholding health care reform law

OLYMPIA, Wash. – Insurance Commissioner Mike Kreidler expressed great relief with the U.S. Supreme Court’s decision upholding the Affordable Care Act and said Washington state is now well ahead of most states in reforming its health care system.

 

Many reforms are currently in place, but key benefits and programs take effect in 2014, including Washington’s new Health Exchange, federal subsidies to help 477,000 people afford health insurance, an expansion of Medicaid for 328,000 poor childless adults and the ban on insurance companies from denying people coverage if they’re sick.

 

“I’m very pleased the Supreme Court chose to uphold the Affordable Care Act,” said Kreidler. “We’ve been busy for two years now implementing the reforms and have made great progress, but there’s a lot left to do before 2014. With the court decision out of the way, we can continue our focus on where it should be – bringing relief to families struggling to find quality, affordable health insurance.”

 

The millions of Washington state consumers benefitting from the Affordable Care Act’s early reforms include:

 

• More than 2.4 million people who no longer face lifetime caps on their health benefits.
• More than 52,000 young adults up to age 26 who have stayed on their parents’ health plans.
• More than 1.2 million people who now have coverage for preventive care with no co-pays or deductibles.
• More than 60,000 people in Medicare who have saved hundreds on their prescription drugs.

 

Washington state also leveraged millions in federal funds available under the Affordable Care Act to create:

 

• Public access to health insurance rate requests. 
• A new marketplace in Washington state for health insurance in 2014 – called an exchange – where people can shop for health plans, compare their options and apply for subsidies.
• A temporary health insurance program (PCIP-WA) for people with pre-existing health conditions.

 

“The Affordable Care Act is not perfect, but it moves us in the right direction and is the only meaningful reform that’s passed in decades,” said Kreidler. “The debate was clearly contentious, and I’m grateful to have it behind us. But, now it’s time to focus on the work ahead – more than a million uninsured people in our state are counting on us.”

Trial Adjournments

Graham v. Vandersloot, 2012 ONCA 60 (C.A.)

In this case, litigation had proceeded at a leisurely pace since 2005. Trial had previously been adjourned when plaintiff's counsel erroneously advised the plaintiff had been in a second accident. Even though a trial date had been selected in 2009, the plaintiff did not arrange medical examinations until shortly before the trial was scheduled to occur in 2010. The plaintiff then sought a six month adjournment, which was denied.  She appealed the decision.

The Court of Appeal allowed the appeal. It held that a key factor was that liability was admitted. Fading memories were less a concern where the primary evidence would be expert opinions. In addition, the defendant would not suffer non-compensable prejudice if a six month adjournment was granted. The failure of plaintiff's counsel to advance the litigation was not to be held against the plaintiff.

Many of the changes to the Rules in 2010 were aimed at ensuring that cases move efficiently through the system and it would seem that late requests for adjournments should generally be avoided. The Graham decision seems to suggest, however, that courts will be generous in granting adjournments to ensure cases are determined on their merits, especially where liability is not an issue.

Cease and desist order issued against Lenovo

Insurance Commissioner Mike Kreidler has issued a cease-and-desist order against computer maker Lenovo, barring the company from continuing to sell illegal service contracts in Washington state.

From May 2008 to May 2012, Lenovo (United States) Inc. is believed to have sold $153,415 worth of service contracts in the state. The plans, which covered repair or replacement of damaged Lenovo products, can only be sold to Washington residents by a licensed insurer or a registered service contract provider. Lenovo is neither.

Kreidler also ordered the company to mail a copy of the cease-and-desist order to all its Washington customers within 10 days.

Nothing in the order prevents the company from fulfilling the terms of the service contracts or from issuing a refund, if requested.

The company’s unauthorized sale of service contracts was initially disclosed by Lenovo itself when it applied for registration as a service contract provider in April 2011. At that point, the company said, it had already sold 855 contracts for $90,630.

When Kreidler’s staff reviewing the application sought more information, the company failed to respond, and later withdrew its application (December 2011). Lenovo later said it had sold a total of 1,327 contracts worth $153,415 to Washingtonians (May 2012).

The company has a right to demand a hearing. The order takes effect immediately.

Theft charges for medical worker who submitted $4 million in bogus bills, sometimes claiming to be a doc

We're going to post a news release soon about this case:


A medical worker submitted at least $4.1 million in bogus bills to insurers, sometimes while falsely claiming to be a doctor or physician’s assistant, has pleaded guilty to theft.

Kenneth R. Welling, 45, of Lake Forest Park, pleaded guilty Thursday in King County Superior Court. The charges -- all of which are felonies -- include one count of first-degree theft and six counts of second-degree theft.

“This was a pretty audacious scam,” said state Insurance Commissioner Mike Kreidler. “We were tipped off to it when a patient contacted us, saying that Welling billed her insurer $89,000 for six surgeries that never happened.”

Welling is a registered surgical technologist and sole proprietor of Shoreline, Wash.-based Alpine Surgical Services. His license allows him to perform tasks like preparing supplies and instruments, passing them to the surgeon and preparing basic sterile packs and trays. But after patients had procedures done, he would often submit large bills with codes listing himself as a doctor or physician’s assistant. He is neither.

Kreidler’s investigators also found numerous instances in which Welling billed for surgeries that never happened. Sometimes he would include post-operative reports, listing himself as the surgeon.

No evidence was found to indicate that Welling was playing an improper role in actual medical care. The fraud involved billing.

“As far as we could tell, the only time he pretended to be a doctor was when he submitted bills,” said Kreidler.

In one woman’s case, Welling billed $140,323 as assisting surgeon for nine surgeries that never took place. Over a five-year period, he billed another woman’s insurer 107 times for 51 different surgeries, listing himself as the primary doctor. Hospital records show she’d only had surgery twice.

From 2004 through 2011, according to medical records obtained by Kreidler’s Special Investigations Unit, Welling billed five insurance companies at least $4.1 million for services he did not provide. He was paid $461,000.

“Part of the reason he got away with this for so long is that he’d rarely challenge an insurer who paid little or nothing,” said Kreidler. “He’d just send them the bills and hope they’d pay.”

The investigation also showed that some patients were complaining to their insurers.

“I am angry!” one woman wrote to her insurance company in 2011. “Here is yet another fraudulent claim. Can’t you people help me to stop this? I never had surgery on Aug. 27, 2009. I never met or had anything to do with Ken Welling.”

A sentencing date is expected to be scheduled soon.

TRUTH ABOUT CREDIT SCORES AND WHY THEY MATTER

THE TRUTH ABOUT CREDIT SCORES

Credit Scores have become more important in the last few years. Increasingly, companies rely upon them for new roles:

Car Insurance: What does good credit have to do with safe driving? It is probably “risk-aversion.” Those with poor credit scores are thought of as being risky for loans. It may well be that they constitute riskier drivers as well.

Getting Hired: It seems oddly backward at first. If you have poor credit because you are out of money, you might be the hardest working candidate that could be hired. But, chances are, a poor credit score might just keep you from getting a call back for that second interview. Employers who use this information will get your permission to check your credit during the interview process.

Renting: You already know that credit scores affect your ability to get a home loan, but harmful information might also tank your rental application on that great apartment you wanted.

Credit Decisions: Instant decisions can be made with in store promotions and credit cards, as well as other kinds of loans.

There are only five elements of the “FICO” score, and surprisingly, the amount of money you have in the bank is NOT one of them! Seriously, you could have a basement full of gold, ten million in the bank and own most of Poplar Avenue and still not be approved for $1,000 store credit card at Sears!

Here, in order, are the magic five factors:

1.  History of Your Payments: A full 35% of your score is determined by whether you make regular and timely payments.

2. Debt Portion Used: 30% of the score has to do with what part of open credit you have that you use. If you only use about a quarter or less of all your available credit, you are understandably seen as a good risk.

Alternatively, if you are maxed-out consistently, you are a much riskier bet, and get a lower score.

3. Years of Credit History: 15% of your score is determined by the length of time that your accounts have been open and used. Thus, even if you have never missed a payment or been late, you cannot have an ideal credit score until you have had credit for several years.

4. New Credit Opened: 10% of a total credit score is subject to recently opened credit. It makes one appear less stable to run up a lot of debt in a short time. (I guess that would hurt our government’s score, huh?)

5. Credit Mixture:  The last 10% considers the multiple types of debt you use.  For instance, having a house note and credit card will count much more than just a card.

In summary, reliable long-term debt-users get good scores. However, it should be pointed out that a good score means you have probably paid bucket-loads of interest at some point.  For instance, on a 30-year mortgage, more monthly interest than principal is paid till around year 19 in most cases.

If you are a great credit risk with a high score, you can likely be relied upon to pay lots more interest over time.

If you want to see your credit reports for free, you are entitled to one from each bureau every 12 months. However, the scores themselves are not free. But, be careful, there is only one government-approved site to use. Do not fall for others that claim to be “Free.” The official free site is www.AnnualCreditReport.com. 

But, be careful. As we learn in Proverbs 22:7, “The rich rule over the poor, and the borrower is servant to the lender.”

Kreidler statement on Regence's proposed 14.7 percent rate hike

Regence BlueShield, one of Washington state's largest health insurers, is proposing an average 14.7 percent hike in premiums for its customers who buy coverage on their own.

Even with that increase, the company says it would also face a loss of $4.5 million from its surplus, which currently exceeds $1 billion.

Here's state Insurance Commissioner Mike Kreidler's statement on the proposal:

“We’ve just received this request. It will undergo a rigorous review by our actuaries.

“Regence contends that even with this increase, it would lose $4.5 million from the company’s surplus. To put that in perspective, that’s less than half of 1 percent of the company’s $1 billion surplus.

“In fact, Regence could continue to lose $4.5 million annually for the next 220 years and it would still have a surplus.

“A similar request by a sister company, Regence BlueCross BlueShield of Oregon, sought a 6.4 percent increase, starting August 1, 2012. But after our review and objections, it withdrew the request today. Any future rate request will face the same thorough scrutiny.”

Subrogated Claim not Barred by Lease Provision

Designer Collection Sales Inc. v. 161 Spadina Inc., [2012] O.J. No. 2026 (S.C.J.)

In the commercial context, it is common for lease agreements to have clauses that transfer risk from the landlord to the tenant. The Superior Court of Justice recently considered whether such a clause absolves a landlord from a property damage claim by the tenant.

In this case the plaintiff company sued its landlord after water damage occurred due to a broken pipe. The plaintiff recovered more than $600,000 under its insurance policy for the damage. The insurer then brought a subrogated claim to recover the sums it paid out.

Under the contract between the parties, the plaintiff was required to take out a liability policy. The contract contained the following provision:

The Landlord is not liable for any damage to the Tenant's property or for any injury to any person in or coming to or from the Premises, however caused, and the Tenant agrees to indemnify the Landlord against the financial consequences of any such liability. In this regard, the Tenant shall purchase and maintain public liability insurance in the amount of no less than one million dollars ($1,000,000) and shall provide proof of this insurance to the Landlord on request.

The landlord brought a motion for summary judgment arguing that the effect of the clause was to transfer the risk of damage or loss to the plaintiff, even if it was due to the landlord’s fault or neglect. The plaintiff argued that the clause was intended to relate to risks covered by public liability rather than property insurance.

Justice Duncan summarized the case law as follows:

[19] The decisions that have been rendered establish this principle: contractual language may create an overwhelming obstacle to recovery against a negligent party whether the claim is asserted directly or on a subrogated basis. An action will fail to the extent a lease expressly or by necessary implication obligates the innocent party to obtain insurance which covers the risk and claims in issue.

The Court dismissed the motion on the basis that there was insufficient evidence regarding whether the parties meant to forfeit the right to sue. Justice Duncan held that merely agreeing to obtain liability insurance did not necessarily mean the plaintiff was agreeing not to sue especially given that property insurance is not the same as liability insurance. There had to be an underlying contractual obligation in the lease that insulated the landlord from liability.

Great article on exhaustion of underlying coverage

Michael Aylward, one of the premier insurance coverage attorneys in Massachusetts as well as an all-around nice guy, has published a comprehensive article on recent developments in the law relating to when underlying coverage is exhausted for the purpose of triggering excess coverage.

Nationwide Mutual Ins. Co. v. Rhoden, Arrieta and Dickey

Post by Pete Dworjanyn

In a 3-2 decision, the South Carolina Supreme Court has concluded that public policy is offended by a portability limitation clause which purports to prevent non-resident relatives from importing UIM coverage from an at-home vehicle’s policy when the involved vehicle lacks UIM coverage. Nationwide Mutual Insurance Company v. Rhoden, Arrieta and Dickey (Op. No. 27131, June 13, 2012). 

Kelly Rhoden and her daughters, Ashley Arrieta and Emerlynn Dickey, resided in the same household. The three were involved in an accident while riding in Arrieta’s car. Arrieta was operating the car. Arrieta’s Nationwide policy did not provide UIM coverage. However, Rhoden insured two cars through Nationwide under a policy that did have UIM coverage. The policy had a portability limitation clause which provided:

3.       If a vehicle owned by you or a relative is involved in an accident

 where you or a relative sustains bodily injury or property damage,

       this policy shall;

a)      be primary if the involved vehicle is your auto described

      on this policy; or

b)      be excess if the involved vehicle is not your auto described

      on this policy.  The amount of coverage applicable under

      this policy shall be the lesser of the coverage limits under

      this policy or the coverage limits on the vehicle

      involved in the accident.

Nationwide brought a declaratory judgment action seeking a finding of no coverage on the ground that Arrieta’s policy had no UIM coverage and therefore clause 3(b) prevented any of the women from recovering under Rhoden’s policy. UIM coverage, like UM coverage, is personal and portable; it follows the individual insured rather than the vehicle insured. The South Carolina Supreme Court discussed our state’s well-settled public policy regarding the personal and portable rule and concluded that as to Rhoden and Dickey the portability limitation violated public policy and thus was unenforceable.

The Supreme Court agreed that the denial of coverage to Arrieta, the driver and owner of the vehicle, did not violate public policy as public policy is not offended by an automobile insurance policy provision which limits the portability of basic “at-home” UIM coverage when the insured has a vehicle involved in the accident.  Public policy is not offended when the insured is driving his own vehicle because he has the ability to decide whether to purchase voluntary UIM coverage. 

The court noted S.C. Code § 38-77-160 does not apply in the non-stacking such as the case presented here. Stacking is defined as the insured’s recovery of damages under more than one policy until all of his damages are satisfied or the limits of all available policies are met.  A dissenting opinion was based in part on that code section.

NEWEST SCAM: Renters Beware

Watch Out for Fake Rentals

There is a new scam, and even the prudent may fall for this one.

How does it work? You need a place to rent. Maybe your home has sold, or your transfer came through and you need a nice rental home fast. Craig's List has a perfect place at an excellent price. When you email the fellow, it sounds perfect. The photos are great. Good neighborhood. Super deal. As a matter of fact, he says you can lock it down if you will just wire the application fee, security deposit and first month's rent.

Your bank is happy to wire the money and you are tickled to send it.

Unfortunately, that is usually the last you hear from anyone. You are so upset, you drive to the home address to find a family who have rented there for three months, and are not ready to move. When you finally track down the real owner, it is not the guy you have been emailing or wiring $2,000.00 to.

You’ve been conned.

These fellows simply copy real rental listings—complete with photos—and then put themselves as the contact information and re-list them. Some just create listings out of thin air.
Either way, they have your money. By the way you still need to spend more to get an actual rental home.

How can you protect yourself from scams like these and others?

1. Don’t get greedy.  If anything is too good to be true, it usually is.

2. Don’t get in a hurry. Think about it. Every foolish decision you have ever made was probably made in a big hurry.

Online resources like trustee’s offices and appraisal sites can show the actual owner’s name. Have a local friend drive to the house and see if it is even vacant.

Rental applications are easy pickings for identity theft. While you fight that battle, your credit will be so ruined for a while it will be difficult to get approved at a legitimate place.

Generally, if moving to a new area, I would rent a monthly room at a Resident’s Inn or long-term suites till I knew the area better. That gives you time to make a better, informed decision and to talk to an owner in person, inside the property.

If you are not greedy and not in a hurry, thieves will often just give up on you and rip off the next guy.

Don’t be that guy.

www.PeelLawFirm.com

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Boyd v. Liberty Life and SelectQuote



Post by Practice Group Chair
Pete Dworjanyn



The South Carolina Court of Appeals has concluded that an authorization to an insurance company to draft premium amounts from a checking account was insufficient consideration to form a contract for life insurance. Boyd v. Liberty Life Insurance Company and SelectQuote Insurance Services (Ct. App. Op. 4985, June 13, 2012)

SelectQuote is an insurance broker that offers consumers quotes and comparison information from a number of independent insurance companies. SelectQuote sent Boyd a solicitation to replace his existing life insurance policy. Based on a phone interview with a SelectQuote agent in which he admitted he was a smoker, Boyd was told that Liberty Life offered the lowest premium quote at $406.17 per month, subject to a medical examination and Underwriter approval.  SelectQuote confirmed in a letter which identified Boyd as “preferred tobacco”, which means a smoker in excellent health. Boyd completed an application which included his authorization to draft his checking account and a copy of a blank voided check, and provided that to a nurse performing the medical exam on behalf of Liberty Life.  Due to blood pressure issues revealed in Boyd’s medical records, Liberty Life approved his application for the Underwriting classification “smoker non-preferred”.  SelectQuote informed Boyd that Liberty Life had approved him at an adjusted rate of $417.73 which Boyd verbally accepted. 

Boyd requested proof he was covered prior to cancelling his existing policy.  SelectQuote sent a fax to Boyd stating his application had been approved by Liberty Life and the policy “will be issued and forwarded to you soon." In a subsequent phone conversation the SelectQuote agent advised Boyd he had “double coverage” until he cancelled his policy with Mutual of Omaha. Boyd asked SelectQuote agent when the first premium would be drafted; she replied it was dependent on the bank.  Boyd acknowledged, “I know that no insurance is in effect until the premium has been paid." Two weeks later Boyd informed SelectQuote he had not yet received the policy.  SelectQuote investigated and determined that the agent, through a clerical error had quoted Boyd the incorrect premium amount.  She inadvertently selected non-tobacco from a pull down menu instead of tobacco.  The smoker/non-preferred premium was actually $1,037.90.  A supervisor called Boyd and informed him of the error. Boyd declined the policy and subsequently bought a policy from another insurer for $916.13 a month. 

Boyd sued SelectQuote and Liberty Life for breach of contract, bad faith and negligent representation.  The Court of Appeals affirmed the circuit court’s grant of summary judgment to Liberty Life and SelectQuote on the ground that no valuable consideration existed to form a contract because Boyd had not paid the premium. Boyd contended the tender of a voided check and written authorization to draft his checking account was sufficient. The record did not contain any evidence that Liberty Life’s approval of Boyd’s insurance application constituted an agreement by Liberty Life to accept the tender of the voided check and authorization to draft his checking account as absolute payment of the premium.  In the absence of an express or implied agreement to the contrary, a check does not constitute payment unless it produces payment in cash. Additionally, Boyd had submitted the voided check and bank authorization as part of the application process two months before the premium amount was finalized.  As a result, neither specified the amount of the premium. The court cited Holmes’ Appleman on Insurance for the proposition that the insured’s authorization of his bank to deduct the amount of the premium from the account does not satisfy the insured’s obligation where no payment was actually made by the bank to the insurer. The Court also referred to Alabama case law, Haupt v Midland Nat’l Life Ins Co 567 So.2d 319 (1990) for a holding that an appellant’s choice of the automatic withdrawal method of payment did not relieve him of his duty to pay the premium.

Boyd also argued the SelectQuote agents misquote of the $417.00 was binding on Liberty Life because SelectQuote acted as Liberty Life’s agent. The Court of Appeals rejected the argument, holding that communicating a premium amount to a prospective insured does not convert an insurance broker into an insurance agent.  Moreover, Liberty Life did not approve Boyd for the non-smoker rate mistakenly quoted by the agent. An insurance broker cannot be converted into an agent of the insurer without evidence creating an inference that he was acting at the “instance or request” of the company.

Appeals Court holds insurer failed to use due diligence to contact insured when it did not use social media

Stephanie Cotto was injured in an automobile accident while riding as a passenger in a vehicle owned by George Luddy Chevrolet and driven by her friend, Luddy employee Julie Bertholdt. Bertholdt was an insured under a policy issued by Universal to Luddy.

Cotto filed suit. She obtained a default judgment as a result of Bertholdt's failure to answer interrogatories. Damages were assessed. Universal refused to satisfy the judgment, asserting that Bertholdt had breached her duty to cooperate.

Cotto filed an action to reach and apply coverage under the policy . The Superior Court held that Universal was entitled to disclaim coverage.

On appeal Cotto argued that Universal had failed to exercise due diligence in obtaining Bertholdt's cooperation.

In Cotto v. Universal Underwriters Ins. Co., 81 Mass. App. Ct. 1142, 2012 WL 2093331 (unpublished), the Massachusetts Appeals Court reversed.

The record on summary judgment showed that Universal had made various attempts to locate Bertholdt and seek her cooperation and that, at one point, she told insurance defense counsel that she was "not going to trial." The Appeals Court held those facts were insufficient to sustain a summary judgment verdict. "Especially given Bertholdt's youth and transient lifestyle, a trier of fact reasonably could conclude that due diligence required Universal to take further steps."

The court noted that after the reach and apply action was filed, Cotto testified at a deposition that she had been able to maintain contact with Bertholdt through text messages, MySpace, and Facebook. "In contrast, there is nothing in the record to indicate that such sites were consulted by Universal or its investigators, despite the importance of social media sites as centers of communication and sources of information. Nor does the record reflect that Universal considered Cotto, herself, as a source of information about Bertholdts' whereabouts."

Why Timeshares Are Bad Investments

Even though I focus on Injury Law, I am often asked about consumer legal matters, especially when speaking to churches and community groups.

On subject that comes up occasionally are timeshares.

Those yearly maintenance fees are not forefront in the consumer's mind at purchase. I have sat through some presentations, and I understand why it can seem like a good idea at first. They ask you questions like this:

1. Do you want to make vacationing a priority for your family? (Of course, who wants to be "Bad Dad.")

2. Have you enjoyed your complimentary (or greatly reduced) stay here the "Almost Water View, But Close Enough Resort and Spa?" (Yes.)

3. Do you plan to vacation in the future? (Beats working. See answer to One, above).

4. Is it usually better to own or to rent? (There is a trick here, but most say "own" right off. Own stifles flexibility. They say you can trade points and so forth, but who needs more bureaucracy in their life? If I rent, I can leave or change on a moments' notice.)

5. Do you understand that you will receive a "deed to the property" that can pass down in your will to your children?  (You bought time, that invisible, ethereal thing, not land. Besides, you can leave a three-legged spotted hamster to your children in your will, but that does not make it a good investment.)

6. So would you like to buy one week or two? You know we are running a special --today only! (Hurry!!)

Look, you may use and even enjoy a timeshare, but financially you are very unlikely to come out ahead. If you want one, you can research them online.  "No, wait! This sale is only good for today!" will echo in your ears. The representative will not let you research at all-- you agreed to 90 minutes of rapt attention and she will take every drop and go in for the close. If she can't do it, she'll get one of the slick, useless-looking guys with the great tan to "explain it to you so you can understand it better."

Escaping a timeshare is a feat worthy of Houdini and is almost always done at a loss, especially if you total up the maintenance fees and the (not really mentioned occasional "special assessment fees") paid out, along with the weeks you could not use it and gave it your brother in law for free!

50% off or more is what you can save by buying after market, but also what you will lose when you sell yours. You could always rent one, though. Most resorts have people who would love for you to rent their unit for a week just to cut losses.

Financing is the selling of money to impatient people. The earlier in life that you understand that most money is made by selling not stuff--but money itself-- the more successful you are likely to be. GM sells cars only so they can sell you money (financing).

You cannot even write off the interest like on a home mortgage. Not like that idea is really good, either. Even if you are in the highest tax bracket at 35%, for every dollar you give a bank in interest (profit), you get .35 cents back on an interest deduction. Heck, I will trade you .35 cents for every dollar you have right now! Bring your friends! (If your CPA recommends buying a house only for the tax deduction, you might want to rethink your advisor's advice.)

In short, I am not mad at you if you bought, or still go out and buy a time share. And, you can be a pretty generous guy when you loan it out to people.

But, just understand, that it is an attempt at a luxury, not a good investment.

Insurance tips: Credit scores and insurance scores

Many insurers use a credit-based "insurance score" as a factor -- a major factor, often -- in setting your rates. It's a quick way of quoting you a price, and insurers maintain that there's a correlation between these credit-based scores and a person's claims history.

Washington state limits how insurers can use these scores, and Commissioner Kreidler has repeatedly pushed for legislation to ban their use completely.

In Washington, insurers cannot hold the following things against you:

• The number of credit inquiries
• Collection accounts identified as medical bills
• A loan if it's the initial purchase or finance of a vehicle or home.

In Washington, insurers must also tell you if you didn't get the best rate due to your score. If this happens, you're entitled to a free copy of your credit report from the credit agency that your insurer used.

What goes into an insurance score? Here's the breakdown of a score from FICO, one of the biggest companies generating these scores for insurers:

• Payment History (40%) – How well you have made payments on your outstanding debt in the past

• Outstanding Debt (30%) – How much debt you currently have

• Credit History Length (15%) – How long you have had a line of credit

• Pursuit of New Credit (10%) – If you have applied for new lines of credit recently

• Credit Mix (5%) – The types of credit you have (credit card, mortgage, auto loans, etc.)

How can you improve your score? The same way you'd improve your credit score: make payments (bills, taxes, fines, etc.) on time. Keep credit card balances as low as possible. Think carefully before opening new lines of credit, such as a department store charge card, just to get a discount.
 
You can check your credit reports from the three nationwide consumer credit reporting companies annually at http://www.annualcreditreport.com/. If you find errors, contact the credit reporting company to have them corrected.
 

A Lawyer Looks at Online Banking

Still Writing Out Checks By Hand?

Old-fashioned check-writing is quickly going the way of the vinyl record and the corded telephone.
Online banking and automatic payments have quietly reduced the use of hand written checks to the point of actually contributing to reductions at the gargantuan U.S. Post Office.

Online bill payment has some definite advantages:

1. No need to order expensive checks.
2. Never run out of checks.
3. No need to stand in line to buy postage.
4. No need to keep envelopes nearby.
5. Never run out of stamps.
6. Save .45 cents on each bill by not using postage.
7. Less paper used means less environmental impacts.
8. If your paper bill gets lost, automatic payments still occur.
9. No need to pay up bills ahead when planning to travel.
10. Online privacy is more secure than the information on each paper check.
11. You can use a credit card or other means to earn perks, points and miles.
12. The first of the month loses its significance as the time to pay bills.

With all these advantages, why are some people still writing checks?
Usually, those born before the moon shot are a bit more dubious about technology--or anything new--for that matter.  There is a healthy skepticism of computers and that can be a well-founded concern.  Some places, like your local church, may not accept electronic payments. However, online checking will mail them a paper check and you don’t even pay the postage.

There is always a worry about online privacy. We all hear the advertisements about identity theft and leaked passwords. The good news is that you are not held liable for identity theft--or for any charges you--or an authorized party did not agree to. It can be a hassle, but identity theft is usually just that.

There are even arguments in favor of really old-fashioned cash over checks. If you go to the store to buy an $89.00 item with nothing but a $100.00 bill in your pocket, you have killed any attempt at impulse buying.

There are also arguments that we should use credit cards exclusively.  You get points, miles and perks for money you would spend anyway.  And, record keeping is much easier when tax time rolls around. However, Dave Ramsey and other experts point out that we all tend to spend much more if we are “charging” it. Additionally, the credit card companies know that, over time, you will get behind and use their profit center: interest.

In the end, I have grown to like online banking a lot.  What do you use and why? Follow, Comment & Share

The Standard of Care in Pedestrian Cases

Annapolis County District School Board v. Marshall, 2012 SCC 27

A four year old boy was injured in an automobile accident when he ran out into the road in front of a school bus. A jury found there was no negligence on the part of the defendant. The trial judge instructed the jury there could be no contributory negligence given the boy’s age but instructed them on s. 125(3) of the Nova Scotia Motor Vehicles Act, which provides a duty on pedestrians to yield the right of way to vehicles when crossing outside of a crosswalk. The judge’s charge included instructions that the standard of care owed to children on a highway is the same as to adults, but there may be circumstances that should put motorists on guard that a child could dart out onto the road. The Court of Appeal reversed the jury’s decision on the basis that the trial judge erred in referring to the right of way provisions. The defendant then appealed to the Supreme Court, which allowed the appeal.

The Supreme Court held the statutory provision was relevant to the consideration of whether the driver was negligent. Justice Deschamps held:

[7] I agree with the appellant that the Court of Appeal failed to appreciate the dual function of statutory right-of-way provisions. Not only do such provisions inform the assessment of whether a pedestrian was contributorily negligent by failing to yield a right of way, they can also help determine whether a driver breached the applicable standard of care in the circumstances. In this case, even though Johnathan’s contributory negligence had been ruled out as a matter of law, the statutory right-of-way provisions continued to inform the standard of care that Mr. Feener owed to all pedestrians. The jury needed to be told that, absent special circumstances, where the driver has the right of way, he or she can reasonably proceed on the assumption that others will follow the rules of the road and yield the right of way to drivers.

The jury’s dismissal of the action was upheld.

Many provinces have similar provisions to the Nova Scotia Act. The Supreme Court’s decision helps to inform the standard of care for motorists in “darting” cases involving children.

Negotiate Before You Mediate

Post by Jack Griffeth

In the 35 years I’ve been practicing law, mediation has dramatically changed the number of critical cases tried to a jury conclusion.  In South Carolina, mediation has become almost a center point of trial practice.  In my home town of Greenville, in the 1990s we would try over 100 civil cases a year in Greenville County alone. In 2010 we tried 40 cases; in 2011 we tried 28 cases.  As a mediator, I routinely do at least 3 mediations each week and have been certified as a mediator for the past fourteen years.  We are beginning to see mediations required in almost every county in South Carolina by operation of Supreme Court Rule or the provision which allows mediation to take place in any county for any case where a circuit judge deems it proper to mediate before placing the case on the trial roster. 

One trend that I see, however, is that sometimes the parties are waiting until mediation to even begin to negotiate.  That is not a bad strategy, but I encourage people to negotiate as early as sufficient discovery would allow; I believe that makes for a more useful and productive mediation when the parties have at least talked before hand.  Prior to the advent of mediation, we would negotiate often in an effort to get cases settled.  My law partner, Joel Collins, advised a group of young lawyers at our annual bar convention several months ago to continue that practice and to not wait until mediation to begin the negotiation process.  I encourage all trial practitioners and insurance defense lawyers to actively seek to try to engage plaintiff’s counsel in negotiation prior to mediation.

Is Life Just High School All Over Again?

IS LIFE LIKE HIGH SCHOOL?

There is a widespread idea that life is just high school all over again.

There is even a song called “High School Never Ends” that purports to discuss this. I have not listened to the song, because it is a “pop” song and there have been virtually no “pop” song I have been able to stomach since about 1988.  (Thank God for Christian and Country music).

I think there is a point to that thought. Life seems to be more effected by who you know, even more so than what you know. But, I also think the fakeness and shallowness of high school does fade away a good bit. After all, most people over 40 have buried someone they loved, many have had a divorce, bankruptcy or a child with some disease. Infertility or cancer just seems to water down the “ohh and ahh” factor over the new car, lake house, fake tans and other juvenile pretenses.

This thought about life being like high school has been thrust upon me since receiving the invitation to my 25th high school reunion. It is not hard to find adults who appear to be in cliques that remind many of the high school “jocks” or the “cheerleaders” and so on.   Oddly, some of the “cool” folks now were not so popular back then. Some high school beauties will not be aging well. Some former jocks will now be on endless yo-yo diets trying to get back that athletic build.  Shy kids may be more outgoing.  Nerds might now be like gazillionares like Bill Gates. Who knows?

Brad Paisley is a country singer with a knack for great lyrics. In one hit song, he thinks about what he would tell himself, if he could write a letter to himself back at 17. In the aptly-titled song, “Letter to Me” he contemplates:
If I could write a letter to me
And send it back in time to myself at 17…
At the stop sign at Tomlinson and Eighth
Always stop completely don't just tap your brakes
And when you get a date with Bridgett make sure the tank is full
On second thought forget it that one turns out kinda cool
Each and every time you have a fight
Just assume you're wrong and daddy is right
And you should really thank Mrs. Bringman
She spend so much extra time
It's like she sees the diamond underneath
And she's polishing you 'til you shine
And oh you got so much going for you going right
But I know at 17 it's hard to see past Friday night
Tonight's the bonfire rally
But you're staying home instead because if you fail Algebra
Mom and dad will kill you dead
Trust me you'll squeak by and get a C
And you're still around to write this letter to me
You've got so much up ahead
You'll make new friends
You should see your kids and wife
And I'd end up saying have no fear
These are nowhere near the best years of your life
I guess I'll see you in the mirror
When you're a grown man
P.S. "go hug Aunt Rita every chance you can"
I wish you'd study Spanish
I wish you'd take a typing class
I wish you wouldn't worry, let it be
I'd say have a little faith and you'll see

This rings true to me. And I have attended a few reunions. (Some say they are only for the thin and the rich, but I went anyway). As for me, I find it rather embarrassing how few folks I actually remember.  The extremes do stand out—the ones that were particularly nice or exceptionally jerks. Everyone in the middle, I remember well, not so much. It reminds me of the old saying, “People forget what you say, but they never forget how you made them feel.”

Facebook has had an interesting effect on the reunions. On one hand, it is much easier to find and invite people than before. On the other hand, you can connect easily with those you wish to through that venue. It is not necessary to go eat rubber chicken to do so.  I keep up with many of my closer friends from high school.

But, for me, there is more to returning to El Dorado High School in Southern Arkansas. I was raised there, and it is special for me to take the kids around and bore them with stories of my childhood.  It will make me really miss my Dad, to see the house he lived in till he passed away too young.

But the highlight of the trip will no doubt be—Spudnuts.  Yes, Spudnuts. They are donuts made with potatoes. They literally melt in your mouth.  I know of no other place close by where they are made.  And my kids will not forgive me if we don’t use this excuse to go and experience that sweet delicacy.  I am investing my life in my children, not impressing folks I only vaguely recall.

Consumer Alert : Home Warranties Warning

As an injury lawyer, I seldom address consumer issues. However, if you have a home warranty, you will want to read this.

A home warranty program pays for covered repairs, and you pay a small service fee for each visit. It is usually $50-60.00. There are advantages:

1. The warranty company has a list of reputable contractors. Due to their constant business, the warranty company is in contact with contractors and they know which ones are taking care of people. That is better than just calling out of the yellow pages.

2. The warranty company is always open, and claims can be filed on line as well. This is great for landlords, who can simply let a tenant call in his problems directly and not bother the landlord to be the middle man. The tenant can also schedule a time when they can be home and alleviate that responsibility from the owner.

3. Also, most repairs are only the fee, even if they have to make multiple trips due to waiting on parts, etc.

However, having a home warranty is not without its pitfalls.

Recently, one leaking air conditioner finally gave up the ghost in a rental home I own. I was glad I had the warranty. That is, until the contractor tried to get me to pay a surprising $510.00 in addition to the $60.00 service fee!

They explained that these were for "uncovered expenses."  Here is the list:

$120.00 cleaning fee
$175.00 to redo drain pipe
$165.00 permit fee
$  50.00 disposal fee

I took issue with this. (No surprise to those who know me). I was really particularly incensed at the "permit fee." According to the local authorities, there is not--and there has never been--a permit required to simply repair a faulty air conditioner.  And $50.00 to "dispose" of something made of copper? Really? It might be worth that in just metal!

In the end, these things were not actually owed. Be aware that this is going on. Or at least it is with AHS Warranty Company.

Be advised.

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Insurance and vintage or antique cars

Q: I'm rebuilding my antique car and my grandfather's one-seater vintage biplane in my garage. Will my homeowners policy cover all the parts if they are stolen?

A: Probably not. Most homeowners policies exclude autos, aircraft, other motorized vehicles and their parts. You might have coverage for, say, a riding lawn mower or golf cart, but you'd be wise to talk to your agent and insurer about separate coverage that may be available for the parts during the rebuild process and after completion. Most antique cars and planes can be covered on specialized policies designed for their generally limited and unique use.



Note: This is one of a series of common -- or in some cases, particularly unusual -- questions received by our consumer advocacy staff, who answer questions from consumers.
Got a question or insurance problem of your own? If you live in Washington, feel free to give us a call, toll-free at 1-800-562-6900. We'll do our best to help. (And if you live in another state or territory, here's a handy map that lists the contact info for your local insurance regulatory office.)

Charleston grocery store prevails in CGL dispute

Post by Bennett Crites

A Charleston grocery store prevailed in a recent ruling involving a coverage dispute after a shooting in the store. In Pennsylvania National Mutual Casualty Insurance Company v. DOSCHER'S SUPER MARKETS, Dist. Court, D. South Carolina 2012, Anita Thorne, as Guardian ad Litem for Burton Thorne, brought suit in the Court of Common Pleas for Charleston County with respect to injuries her son sustained when he was shot by a coworker at Doscher’s Super Market.  As a result, Penn National Insurance Company, Doscher’s insurer, subsequently filed suit against Doscher’s in United States District Court regarding Penn National’s duty to defend and indemnify Doscher’s in the underlying state court action.

The facts of the underlying tort action alleged that Doscher’s employed Burton Thorne as a grocery store bagger, and that Thorne was shot by a fellow employee in the break-room during one of Thorne’s work shifts.  The underlying complaint alleges that the employer failed to take adequate steps to make the workplace safe and to protect the defendant-employee, Burton Thorne, after learning of threats by the co-worker. Thorne and others testified that he was shot because of the shooter’s jealousy over Thorne’s friendship with a fellow female employee, not because of a work-related dispute, and that the shooting coincidentally happened to take place on the premises of Doscher’s.

The CGL policy at issue excluded coverage for bodily injury to an “‘employee’ of the insured arising out of and in the course of … employment by the insured.” The only dispute here was whether Thorne’s injuries arose out of his employment.  In considering the cross motions for summary judgment, the judge noted that South Carolina courts have interpreted the term “arising out of” when used in an insurance policy exclusion, to be narrowly construed to mean “caused by.”

Viewing the evidence in the light most favorable to the insurer, Judge David Norton could not find that the alleged assault was “caused by” and “arose out of” the employment of Thorne. Rather, the evidence showed that the incident was caused by a personal dispute. Therefore, the employer’s liability exclusion does not apply, and therefore Penn National was not relieved of its duty to defend and indemnify the employer.

Only time will tell how this case will affect other CGL policies as this is a fact-specific inquiry.  To defend or not to defend in this matter? It appears we have an answer, unless the Fourth Circuit says otherwise.

Bennett Crites is a shareholder in the Collins & Lacy Charleston Office practicing in products liability, premises liability, automobile negligence, defamation, insurance bad faith and commercial trucking law. Bennett has experience in litigating cases from minor injury to wrongful death and catastrophic injury. Super Lawyers® has identified Bennett as a Rising Star®. Prior to joining Collins & Lacy, Bennett was an attorney with a law firm in Charleston, South Carolina. He also served as a judicial law clerk to the Honorable R. Markley Dennis, Jr. and has corporate experience in the financial sector. Bennett earned his law degree from the University of South Carolina School of Law and his undergraduate degree in Business Administration from the Citadel.

Coming this fall: Agents and brokers in WA can submit fingerprints electronically

In Washington, as in most states, we require insurance agents and brokers to submit their fingerprints for the required background check.

For years, this has been done on paper cards, on which a worker rolls the applicant's inked fingers. It's messy, but more importantly, it's difficult to get good, usable prints. In fact, there's a 30 percent rejection rate by the State Patrol, meaning that the applicant has to go through the whole process again. We know it can be a pain, but we haven't had a good alternative.

So, good news: Starting late this summer or early fall, we will begin accepting electronically submitted fingerprints. We strongly encourage our resident applicants to use the service.

Why?

For one thing, the rejection rate is much lower. Instead of 30 percent, it's less than 3 percent.

It will also cost less. It now costs $42.50 to submit a paper fingerprint card. It will cost $32.50 to do it electronically.

It takes less time. In fact, in some cases, it could mean getting your license issued weeks earlier than with a paper card.

And there's probably a location close to you. More than 30 locations in Washington state can provide the fingerprinting service. Pearson Vue exam centers offer the service when applicants take the insurance exam, and the company also has a third-party vendor, Morpho Trust, that offers fingerprinting at several additional locations. You can find links to both on our new web page about electronic fingerprinting for insurance licensees.

Lastly, a question I know we'll get: Are electronic fingerprints required? No, not at this point. But we intend to require them starting during the first half of 2013.

Open letter from Commissioner Kreidler to Premera and LifeWise policyholders

Our office has denied requests from Premera Blue Cross to strip some of the company's health plans of vital prescription drug coverage.

Premera filed a request with our office in late April, seeking approval to remove all prescription drug coverage from its small employer plans. These are plans sold to employers with 1-50 employees. Premera subsidiary Lifewise filed a request to remove drugs from all of its catastrophic (meaning high-deductible) plans.

Commissioner Kreidler disapproved those requests. Here's an open letter from the commissioner to Premera and Lifewise policyholders. From the letter:

Let me be clear: Contrary to what Premera has implied, your health plan can keep generic drug coverage and even require you to use a generic drug first. Nothing in my recent decision restricts your health plan from covering generic drugs.But if you get sick and a generic drug doesn’t exist for your condition or doesn’t work for you, your health insurer must let you try a brand-name drug that could work.


I understand that generic drugs may work for many people most of the time, but it’s my job to protect all insurance consumers. There are some diseases for which generic drugs may not work, such as certain cancers and mental illnesses, diabetes, MS, certain types of arthritis, and AIDS.

Legally, if a plan has prescription drug coverage it cannot restrict someone’s access to a prescription drug that could be vital to a medical condition that’s otherwise covered by the plan and for which they’ve paid a premium.

New insurance bills take effect tomorrow

Four new insurance-related bills take effect tomorrow. None were insurance commissioner request legislation, but they will impact consumers starting June 7.

Whether you'd like to share your car or get evacuated home from a trip, there's something for everyone. Want to know more? Here's the complete list:

Usage-based insurance

Car sharing

Air rescue

PEBB ombudsman for retired state employees

Definition of "Accident" Under the SABS

Downer v. Personal Insurance Co., 2012 ONCA 302 (C.A.)

The issue on this appeal was whether the plaintiff was in an “accident” that entitled him to accident benefits.

On February 26, 2000, the plaintiff was physically assaulted by several unidentified assailants while parked at a gas station sorting his money. He escaped by putting his car in gear and driving away. He believed he may have run over one of his assailants in the course of fleeing. He claimed he sustained psychological and physical injuries as a result of the incident.

The insurer initially paid benefits, but then took the position that the injuries were not caused by an accident within the meaning of s. 2(1) of the SABS, which defines an "accident" as “an incident in which the use or operation of an automobile directly causes an impairment”. The motion judge granted a declaration that the plaintiff was involved in an “accident” within the meaning of the SABS. The insurer appealed.

The Court of Appeal allowed the appeal with respect to the physical injuries, holding that the physical assault did not constitute an “accident”. The Court held that a trial was required to determine whether the psychological injuries were caused by the ordinary use of a motor vehicle.

The proper test to be applied is the modified causation test set out in Greenhalgh v. ING Halifax Insurance Co. (2004), 72 O.R. (3d) 338 (C.A.):

1. Was the use or operation of the vehicle a cause of the injuries?
2. If the use or operation of a vehicle was a cause of the injuries, was there an intervening act or intervening acts that resulted in the injuries that cannot be said to be part of the “ordinary course of things?” In that sense, can it be said that the use or operation of the vehicle was a “direct cause” of the injuries?

At paragraph 39, Justice LaForme held that under the modified causation test, it is not enough to show that an automobile was the location of an injury inflicted by tortfeasors, or that the automobile was somehow involved in the incident giving rise to the injury. Rather, the use or operation of the automobile must have directly caused the injury. Justice LaForme held that an assault on the plaintiff as he sat in his vehicle sorting money cannot be considered a normal incident of the risk created by the use of operation of the car. With respect to the psychological injuries, he held that running someone over could be considered a normal incident of the risk created by the use or operation of a vehicle.

One has to wonder whether this case has limited applicability due to its facts, or whether it will give rise to more claims of psychological injuries in order to fit an incident into the definition of “accident” within the SABS.

Insurance and sleepovers

Q: My daughter's having a friend over for a sleepover. If the friend trips and falls or something, would my homeowners policy cover her medical bills?

A: Generally yes, since most modern homeowners policies have what's known as "guest medical" coverage. This is designed to pay the medical bills -- up to a specified dollar limit per accident -- for accidental injury to guests. But it doesn't cover you or other resident family members.

The coverage is a no-fault type of coverage that is designed to apply to accidents with no determination of fault or negligence on your part. Your insurer will still do an investigation to gather the facts of the accident.

Note: This is one of a series of common -- or in some cases, particularly unusual -- questions received by our consumer advocacy staff, who answer questions from consumers.
Got a question or insurance problem of your own? If you live in Washington, feel free to give us a call, toll-free at 1-800-562-6900. We'll do our best to help. (And if you live in another state or territory, here's a handy map that lists the contact info for your local insurance regulatory office.)

Washington state insurance markets: Our annual report

Each year, we issue an annual report summarizing the insurance markets in Washington state, selected financial statement data, authorized insurers by line of business, top companies, top groups, company changes, etc.

Get 'em before they're sold out. (That's a joke. They're online only, and we have no shortage of pixels.)