Colorado Legislature bones ERISA insurers

This is the first in what I hope will be a series of entries describing the fine work done by the Colorado Legislature regarding insurance during its recently concluded session.

The topic of this entry is House Bill 1407 (pdf, 8 pages), the brainchild of Rep. Andrew Romanoff (D-Denver) and Sen. Ken Gordon (D-Denver). The bill passed by big margins in both the House (42-22) and the Senate (24-11), and now needs only the governor’s signature.

H.B. 1407 increases the fines that the Insurance Commissioner can levy against an insurance company for violating statutes and regulations, but the meat of the bill is newly-added C.R.S. §§ 10-3-1115 and 10-3-1116. Those sections prohibit insurers from unreasonably denying or delaying payment of first-party claims. Generally speaking, a first-party claim is a claim for insurance benefits made under your own policy. The bill doesn’t apply to third-party claims, i.e., claims made against the liability insurance policy of somebody else.

If a first-party insurer denies a claim or delays payment “without a reasonable basis,” the insured can file suit in district court and recover double benefits, costs and attorney fees. Before H.B. 1407, the insurance code expressly disclaimed any private right of action. Perhaps now insurance companies will think twice before being such insufferably adversarial cocks when handling first-party claims.

But that ain’t the half of it! Both of the new C.R.S. sections cited above contain a legislative declaration that “this section is a law regulating insurance.” Yeah, well, no shit. Why did the state legislature go out of its way to declare the painfully obvious?

The answer lies in an abomination known as the federal Employee Retirement Income Security Act (”ERISA”), previously discussed here. ERISA governs employee benefit plans, which includes employer-provided health, life and disability insurance. As interpreted by the federal courts, ERISA is a veritable cornucopia of treasures for insurance companies that underwrite employee benefit plans.

For instance, imagine a world in which: (1) an insurance company can insert in its policies a provision stating that the insurer itself has sole and absolute discretion to interpret the policy’s terms and determine eligibility for benefits; and (2) courts will enforce such a provision. Incredibly enough, that’s not just some insurance company CEO’s clown-punching fantasy; as to ERISA-governed benefit plans, it’s the law. If the plan contains the magic language, the insurer’s decision to deny coverage is subject only to “arbitrary and capricious” review in court. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). As you might imagine, that standard pretty much amounts to de facto immunity from judicial review.

Where it applies, ERISA preempts (i.e., renders unenforceable) state law. However, an exception to the general rule of preemption exists for “any law of any State which regulates insurance . . . .” 29 U.S.C. § 1144(b)(2)(A). And that, my friends, is why the Colorado Legislature included that peculiar statement in §§ 10-3-1115 and 10-3-1116. They wanted to avoid the preemptive effects of ERISA.

That’s a big deal for two reasons. First, in the appalling small percentage of ERISA-controlled cases that the insured actually manages to win, recovery is limited to the benefits due under the plan. 29 U.S.C. § 1132(a)(1)(B). Under H.B. 1407, a successful claimant gets double damages and attorney fees.

Second, H.B. 1407 prohibits insurers from inserting Firestone-style “sole discretion” provisions into health and disability plans and policies issued in this here state. Such plans and policies must provide for de novo judicial review of benefits denials and a trial by jury, something else you can’t get in an ERISA-governed case.

Presumably, ERISA’s tender mercies still inure to the benefit of self-funded plans and to insurance policies issued in other states, but H.B. 1407 is a massive step in the right direction. Mad, mad props to Rep. Romanoff, Sen. Gordon and every state legislator who had the stones to vote for this bill.

California Supreme Court invalidates gay marriage ban

It’s a good day for civil rights, at least in California. Today that state’s high court ruled by a vote of 4-3 that California statutes limiting marriage to opposite-sex couples violates the equal protection provision of the California Constitution. In re Marriage Cases (pdf, 172 pages). The majority consists of Chief Justice Ronald George (author of the majority opinion) and Justices Joyce Kennard, Kathryn Werdegar, and Carlos Moreno.

The court ruled as it did despite the fact that California has a comprehensive statutory domestic partnership scheme under which same-sex couples can obtain pretty much all the legal benefits that marriage confers upon opposite-sex couples. Thus:

[T]he legal issue we must resolve is not whether it would be constitutionally permissible under the California Constitution for the state to limit marriage only to opposite-sex couples while denying same-sex couples any opportunity to enter into an official relationship with all or virtually all of the same substantive attributes, but rather whether our state Constitution prohibits the state from establishing a statutory scheme in which both opposite-sex and same-sex couples are granted the right to enter into an officially recognized family relationship that affords all of the significant legal rights and obligations traditionally associated under state law with the institution of marriage, but under which the union of an opposite-sex couple is officially designated a “marriage” whereas the union of a same-sex couple is officially designated a “domestic partnership.”

The way the court phrased the issue strongly suggests a negative answer, but the actual answer was a resounding yes. Happily, the Court’s approach goes far beyond the “separate but equal” holding of the New Jersey Supreme Court a few years back.

Based on my thus far extremely cursory reading, it appears that the Court held: (1) marriage is a fundamental right for purposes of California equal protection analysis; (2) the right can’t limited by narrowly defining “marriage” to include just traditional marriage; (3) the “strict scrutiny” standard of review applies to the statute at issue because the disparate treatment the statute provides infringes on same-sex couples’ “fundamental interest in having their family relationship accorded the same respect and dignity enjoyed by an opposite-sex couple”; and (4) the statute fails strict scrutiny review because the asserted justification for the statutory classification — namely “the interest in retaining the traditional and well-established definition of marriage” — is not the sort of compelling state interest needed to preserve the statute from constitutional attack.

As to remedy, the court held that the statutory language “limiting the designation of marriage to a union ‘between a man and a woman’ is unconstitutional and must be stricken from the statute, and that the remaining statutory language must be understood as making the designation of marriage available both to opposite-sex and same-sex couples.”

I’ll post more once I’ve had a chance to digest the 172 pages of majority, concurring and dissenting opinions. A couple of quick, half-educated observations:

- Some sections of the majority opinion contain citations to a lot of federal court cases. That makes me wonder whether the California Supreme Court has fully insulated itself from SCOTUS review.

- The decision is based on the state constitution, so the obvious next step for gay rights opponents is a state constitutional amendment.

Adequate and Independent State Grounds:

I’m no longer especially concerned about the prospect of the U.S. Supreme Court hearing this case based on a finding that the California Supreme Court’s decision isn’t based on a genuinely “independent” state law ground. Yes, the majority opinion is laced throughout with citations to federal cases, but that shouldn’t make much of a difference here. The decision is based in part on the California Supreme Court’s holding that legislative classifications based on sexual orientation are “suspect” for purposes of the state constitution’s Equal Protection Clause. That holding is unprecedented, as far as I’m aware, and anyone who thinks such a holding has any support in federal equal protection case law simply hasn’t been paying attention for the last forty years or so.

Activist Judges:

The terms “judicial activism” and “activist judges” are mantras within the strange little world of the right wing scream apparatus. The terms are so overused that they’re pretty much bereft of any genuine meaning. “Activist judges” translates to “I’m a socially conservative knob and I really, really dislike that decision” nowadays.

But the terms do have their effect, even on judges. The majority opinion pretty much screams “we are not activists” from very early on. Such defensive legal writing is bound to have some effect on the content of court opinions.

Justice Corrigan begins her dissent, all in all a fine piece of work, by noting her personal preference for the result reached by the majority. That too says, “I am not an activist.” Justice Baxter’s dissent backhandedly calls the majority decision activist when he notes that “in ten, fifteen, or twenty years, an activist court might . . . rely on the majority’s analysis to conclude, on the basis of a perceived evolution in community values, that the laws prohibiting polygamous and incestuous marriages were no longer constitutionally justified[.]” (Baxter, J., concurring in part and dissenting in part, at 17.)

There was plenty of activism to go around here. An activist General Assembly twice voted to end the gay marriage ban legislatively. An activist governor twice nixed those efforts, thereby dumping the issue into the judiciary’s lap. Yesterday the Governator announced that he will abide by the decision and reiterated his position that he won’t support a constitutional amendment overturning the decision. At some level, then, Arnold understands the distinction between judges acting and judicial activism.

Vexatious civil litigant extorts settlement; quasi-competent lawyer tapped to pick new federal judges

We all remember Robert Bork. President Reagan nominated the extremist loon to the U.S. Supreme Court in 1987, but the nomination failed spectacularly in the U.S. Senate. There was much chest-thumping among various liberal groups over that development, but the person most directly responsible for the demise of Bork’s nomination was Republican Senator Arlen Specter, who meticulously and with surgical precision disemboweled Bork during his testimony before Senate Judiciary Committee.

Bork hates personal injury litigation. As discussed briefly here, he hates PI litigation so much that “originalism” flies right out the goddamn window when the topic turns to federal tort “reform” legislation.

On June 6, 2006, Bork was slated to give a speech at the hoity-toity Yale Club in New York City. While attempting to mount the dais, Bork fell backward and sustained injury to his left leg and head.

One might expect such a staunch tort “reformer” to cowboy up and deal with his injuries on his own, as God intended. But no! Bork filed a premises liability action against the Yale Club on June 6, 2007 in the U.S. District Court for the Southern District of New York.

I had no problem with Bork seeking redress through the civil justice system. Every injured person should have access to courts of law, even flaming hypocritical toilet bugs like Robert Bork. But the complaint — the document filed to initiate the lawsuit — was a whole ‘nother bundle of laundry.

Bork’s lead counsel was Randy M. Mastro, former NYC Deputy Mayor and now a partner at the silk stocking law firm Gibson, Dunn & Crutcher, LLP. I’m sure Mr. Mastro does brilliant work when it comes to arranging multi-billion dollar deals for importation and exportation of silk top hats and monocles, but he doesn’t know shit from shinola when it comes to the nuts and bolts of drafting a premises liability complaint.

Tort “reform” advocate Ted Frank called the complaint “embarrassingly silly.” Eric Turkewitz, an attorney who handles personal injury cases in New York for a living, provided a detailed analysis of the many, many drafting and lawyering errors associated with Mr. Mastro’s complaint here. Especially hysterical were the demands for attorney fees and prejudgment interest, neither of which New York law allows. Mr. Turkewitz repeated the favor here when Mastro filed an amended complaint fixing some but by no means all the deficiencies.

But hey, Bork is a conservative icon and Mastro is a playa in the world of New York politics. It’s self-evidently true that such people warrant better treatment than you or I. Accordingly, the Yale Club’s insurer settled Bork’s lawsuit last week. The terms, including the settlement amount, are confidential.

And what of the lawyer who so buffoonishly bollixed things? He’s now a member of John “Walnuts” McCain’s “Justice Advisory Committee“. He’ll be helping select federal judges in the event Walnuts gets to be our next president.

Edwards to endorse Obama

CNN tells us that John Edwards, my first choice for Democratic presidential nominee, will endorse Barack Obama today during a campaign event in Grand Rapids, Michigan.

Personally, I welcome any happening that might bring us closer to the demise of Clinton’s candidacy. I’m still a bit disappointed that Edwards won’t be our next president, but he’d make a damn fine attorney general. *Nudge nudge, wink wink, say n’more say n’more*

Update: There’s video of the Edwards endorsement here courtesy of Crooks and Liars.

Big gay California’s big gay marriage decision

Reuters reports that the Supreme Court of California will issue its long awaited gay marriage decision tomorrow at 10:00 a.m. PDT (1:00 p.m. EDT). The issue:

Does California’s statutory ban on marriage between two persons of the same sex violate the California Constitution by denying equal protection of the laws on the basis of sexual orientation or sex, by infringing on the fundamental right to marry, or by denying the right to privacy and freedom of expression?

In re Marriage Cases (pdf, 1 page).

Philip Morris Punitive Damages Redux

The California Punitive Damages Blog reports that the U.S. Supreme Court will consider the latest petition for certiorari of cigarette manufacturer Philip Morris in Philip Morris USA, Inc. v. Williams during its May 22, 2008 conference. When we last discussed this case, a 5-4 SCOTUS majority had vacated a $79.5 million punitive damages judgment in favor of the widow of a deceased smoker on the ground that due process “prohibits a State’s inflicting punishment for harm caused strangers to the litigation.” On remand the Oregon Supreme Court — wily devils that they are — found a way to sidestep the due process issue and keep the punitive damages judgment alive on unrelated state law grounds. It comes as no surprise that Philip Morris is demanding SCOTUS review yet again.

Is the jury instruction issue on which the Oregon Supreme Court based its most recent ruling truly an adequate and independent state law ground of decision? Will SCOTUS be outraged at what it perceives to be a big, fat “blow it out your ass” from a state supreme court? Stay tuned!

Credit card arbitration antitrust lawsuit revived

So you get yourself a credit card. Credit card companies being what they are, you soon encounter billing problems that can’t be worked out amicably. Feisty bastard that you are, you write them a letter saying they have one last chance to resolve the problem or you’ll file suit in your local small claims court.

Oops. No can do. Buried deep within the mountain of small-printed boilerplate that is your agreement with the issuing bank — an agreement you never saw until after you signed up for the card, by the way — is a provision requiring that all disputes be resolved via binding arbitration. In New York. On your dime. So yeah, you can pursue your $200 claim against CapitalOne, but you’ll have to get your ass to New York and present your case to the company’s hand-picked arbitrator. In the best case scenario, you recover spend a grand or so on travel, food, lodging and lost wages to get $200.

No big deal, though, right? The competition generated by the Holy Free Market means that you can walk right down the street and get a card from a different bank that doesn’t require binding arbitration!

Not so, at least according to the plaintiffs in Ross v. Bank of America, N.A. (USA) (pdf, 15 pages). There, seven named plaintiffs filed a putative class antitrust action in the U.S. District Court for the Southern District of New York in 2005 against nineteen credit card issuing banks. The plaintiffs alleged that the banks violated the Sherman Act by colluding to make mandatory binding arbitration an industry-wide practice, thus wrecking consumer choice and reducing the overall quality of credit card services.

The banks moved to dismiss the case for lack of jurisdiction, contending that the plaintiffs lacked both Article III standing, previously discussed here, and statutory standing as set forth in cases interpreting the Sherman Act.

In what must have been a delicious exercise in legal drafting for some malevolent defense attorney, the banks also moved to stay the lawsuit and compel arbitration.

The trial judge dismissed the case on subject matter jurisdiction grounds, holding that the plaintiffs lacked Article III standing. Today the U.S. Court of Appeals for the Second Circuit reversed that ruling and reinstated the case. (See pdf linked above.) The court of appeals found that “[t]he Complaint alleges that reduced choice and diminished quality in credit services result directly from the banks’ illegal collusion to constrict the options available to cardholders. These harms are sufficiently ‘actual or imminent,’ as well as ‘distinct and palpable,’ to constitute Article III injury in fact.”

This one has a long, long way to go. The banks will no doubt renew their statutory standing arguments in the trial court. If the plaintiffs jump that hurdle, the banks will once again demand that the trial court stay the lawsuit and compel arbitration. If that fails, the banks will claim that the case should be dismissed for failure to state a viable claim under the new Bell Atlantic pleading standard, previously discussed here and here. If the case is still breathing after all that, then the REAL fun begins: fighting over whether the court should certify the case as a class action.

So then, there’s no cause for a dancing-naked-round-the-fire type of celebration just yet, but the Second Circuit’s ruling was a necessary step in the right direction.

H/T - TortDeform

We’re Number Nine!

Oh, glorious day! The “Institute for Legal Reform,” a charade generated by that whorishly greedy gaggle of shameless liars collectively known as the U.S. Chamber of Commerce, has published its annual Lawsuit Climate report for 2008.

Turns out that Colorado is the state with the ninth Mostest Fairest Litigation Climate in all the land, up from a dismal twenty-first place showing in 2007.

We have a way to go before overtaking states like Delaware and Indiana, where people injured through the negligence of others are staked to the ground and beaten vigorously about the crotch with canoe paddles preemptively before they can even think about making a claim, but we’re making progress, dammit.

After all, defense verdicts in injury cases arising from rear-end car crashes are running at about seventy percent in Colorado these days. That’s right: Seventy. Percent. And we’re not talking med mal here. We’re talking rear-end car crashes, the clearest of all clear liability cases.

Lesson: Colorado’s a magnificent place to live, but don’t ever, under any circumstances, get hurt here. If you do, you’re pretty much boned.

“No, Mr. [Friedman], I want you to [p]ie.”

I detest Thomas Friedman. Y’all know who I’m talking about. Friedman is the quasi-sentient blabbering head and “globalist” who authored the aggressively stupid The Lexus and the Olive Tree and The World is Flat.

Even the most fleeting thought of Friedman is enough to wreck an entire day for me. The only solace I have on such days is knowing that a talent-free sack of shit such as Friedman would be among the first to die if the global free market social Darwinist meritocracy he advocates ever comes to pass.

Well, that was my only solace. Now I also have this.

H/T - Wonkette

Gideons take another judicial whuppin’

The Gideon Society loves distributing Bibles in public schools. What’s more, all too many school boards love letting them do it.

Fortunately enough, courts haven’t been taking too kindly to such unconstitutional shenanigans. Here and here we discussed Doe v. South Iron R-1 School District. This week brings us Roe v. Tangipahoa Parish Sch. Bd. (pdf, 11 pages), decided on Tuesday by the U.S. District Court for the Eastern District of Louisiana.

Seems that the principal of a Louisiana public middle school, acting on instructions from the school board, allowed the Gideons to distribute Bibles to students outside his office. The principal advised all fifth grade teachers that the Gideons would be there on a particular day and instructed the teachers to tell students about the goings-on. The principal also told teachers to advise students that taking a Bible was entirely voluntary.

Judge Carl J. Barbier held that the Bible distribution violated not one, not two, but all three of the standards for determining whether a governmental entity has violated the Establishment Clause of the First Amendment: the tripartite test of Lemon v. Kurtzman, 403 U.S. 602 (1971); the coercion test of Lee v. Weisman, 505 U.S. 577 (1992); and the endorsement test of Allegheny County v. ACLU, 492 U.S. 573 (1989). The nominally voluntary nature of the event was, well, nominal, and did nothing to save it.

Soldiers in the Army of the Lord that they are, the school board members voted unanimously to appeal.