Across the United States, most states hold that an insurer can’t deny coverage to a policyholder because of a trivial failure to comply with the policy’s “notice” provisions after a claim. See, e.g., Arrowood Indemnity Co v King, 304 Conn 179, 203; 39 A3d 712 (2012) (joining the “overwhelming majority” of jurisdictions that require insurers to establish prejudice); PAJ, Inc v Hanover Ins Co, 243 SW3d 630, 633-634 (Tex. 2008) (noting that most jurisdictions presented with the issue have adopted a “notice-prejudice rule” in some form, consistently with the modern trend); Prince George’s Co v Local Gov’t Ins Trust, 388 Md 162, 182-183; 879 A2d 81 (2005) (vast majority of states have adopted a prejudice requirement and noting that 38 states have adopted a “prejudice rule” whereas only 6 states have maintained a traditional “no prejudice rule”); Brakeman v. Potomac Ins. Co., 371 A.2d 193, 198 (Pa. 1977)(Under Pennsylvania law, “where an insurance company seeks to be relieved of its obligations under a liability insurance policy on the ground of late notice, the insurance company will be required to prove that the notice provision was in fact breached and that the breach resulted in prejudice to its position.”); Cooper v. Gov’t Employees Ins. Co., 237 A.2d 870, 874 (N.J. 1968)(Under New Jersey law, insurer must prove a breach of the notice provision and a likelihood of appreciable prejudice).

The rule makes sense. If you pay, and pay, and pay, for insurance coverage, and then report your incident, say, 60 days after it happened as compared to the 30 days required by the policy, then the insurer can’t just take your money and run like a thief unless it can show the delay somehow prejudiced them. Maybe critical evidence was lost. Who knows — the key issue is that the insurance company has to show some reason why that delay really caused a problem. Otherwise, it’s no harm, no foul.

William DeFrain was minding his own business as a pedestrian on May 31, 2008, when a hit-and-run driver ran him over, causing severe head injuries. Severe enough that they sent him to the hospital, where he was diagnosed with serious and permanent brain injuries, from which he died five months later. His mother was dealing with her son, the brain surgery he received soon after the accident, and his crippling disability, and so she didn’t end up notifying State Farm, with which she had an uninsured driver insurance policy, until August 25, 2008, a whole 56 days later than the 30 days required by the policy.

That, of course, didn’t prejudice State Farm. There’s nothing else they needed to know. There’s no evidence that was lost. Nobody knew who the driver was, not even the police, and the delay didn’t do anything to change that. William’s condition was documented from the moment he was found, and all those documents were available to State Farm. But some soulless bloodsuckers at State Farm saw a way to keep the company’s reserves up and their “policy losses” down, so, like a good neighbor who ransacks your house for jewelry after a hurricane*, State Farm saw the chance to make a quick buck by denying a faithful policyholder their due and went for it. 
Continue Reading State Farm Cheats Brain Injury Victim, Michigan Supreme Court Approves

Walter Olson at Point of Law refers us to a proposal by a Democratic legislator in Maryland:

Primary-care providers who practice at federally qualified health centers do not need to purchase medical malpractice insurance. Why? The government promises to cover any claims against them under the Federal Tort Claims Act. If a patient has a

Business Week points us to the major cases.

As Litigation & Trial is a legal, rather than a business, blog, I’m going to take their list of cases but replace their description of each with the actual legal issue at stake, along with links to SCOTUSWiki, which hosts all of the relevant briefs for

Every patient can be assured that, upon filing a major claim for chemotherapy or neurosurgery or the like, the insurance company will scour their medical records and application to find for any excuse to deny coverage.
The outrageous part is that half of these investigations of expensive claims result in recission. Does anyone believe half of these people lied on their insurance forms? The insurance companies certainly don’t, which is why the insurance companies refused Congress’ suggestion they limit recission to cases of intentional fraud.

Continue Reading Health Insurance “Rescission” Three Times More Likely Than Losing Russian Roulette

I’ve written before about Contingent Fee Business Lawyers As Venture Capitalists and Lawyers Who "Don’t Take Possible Losers," so I was thrilled to read the NYTimes yesterday:

Richard W. Fields says he has come up with a win-win financial strategy for the downturn. He is investing in lawsuits.

Not in trip-and-fall cases, mind

Via Overlawyered, George Will at the Washington Post favorably reviews Philip K. Howard’s "Life Without Lawyers:"

Long Beach, N.J., removed signs warning swimmers about riptides, although the oblivious tides continued. The warning label on a five-inch fishing lure with a three-pronged hook says "Harmful if swallowed"; the label on a letter opener says "Safety

On Christmas Eve, the Third Circuit issued its opinion in Jurinko v. The Medical Protective Company and The Medical Care Availability and Reduction of Error (MCARE) Fund, a fascinating insurance bad faith claim arising from the failure to tender policy limits in a medical malpractice case, prompting an article in yesterday’s Legal Intelligencer and

Legal Blog Watch points us to an interesting development:

A project spearheaded by the Media Bloggers Association will provide bloggers access to first-of-its-kind liability insurance along with free training in media law. The insurance program, called BlogInsure, will provide coverage for claims against bloggers involving defamation, invasion of privacy and copyright infringement. According to the

I don’t mean to intrude upon the jurisdiction of the financial blogs. If you’d like to know more about the financial aspect of the AIG loan, here’s The Big Picture and the Economist’s View, both of which link all over the place.

I’d like to talk about the legal structure of the "loan," given its resemblance to an entity that plaintiffs’ attorneys like myself frequently encounter: the insurance guaranty assocation. As we’ll see below, the loan creates obligations similar to those of a guaranty association, but with a problematic twist: the federal government now not only must decide how to conserve capital available for future insurance claimants, but also what to do with the assets and value of the insurance company itself, two functions typically given to different parties in ordinary insurance company liquidations.

More below.

[UPDATED: The powers that be have deigned to fill us in on the details. The loan is quite traditional, despite prior reporting, and the Federal Reserve does not hold an interest unless and until the loan is not repaid in 24 months. The below analysis thus still applies, but not until that default in two years.

UPDATED AGAIN: It’s happened already (so much for two years!), we now directly own $40 Billion of AIG.]Continue Reading AIG: Has the Federal Reserve Become Both a Receiver and an Insurance Guaranty Fund?