May 23, 2013

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SB 13-277: Creating a Uniform Process for Obtaining Prior Authorization for Coverage of a Prescription Drug Benefit

April 29, 2013 by Leave a Comment

On Tuesday, April 16, 2013, Sen. Irene Aguilar introduced SB 13-277 – Concerning the Development of a Prior Authorization Process to be Used in Obtaining Prior Approval from Carriers for Coverage of Drug Benefits. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill requires the commissioner of insurance (commissioner) to develop, by July 31, 2014, and prescribing providers, carriers, and, if applicable, pharmacy benefit management firms (PBMs), to use, by Jan. 1, 2015, a uniform prior authorization process for purposes of submitting and receiving requests for prior coverage approval of a drug benefit.

The commissioner is directed to adopt rules to establish the prior authorization process, which is to include specified components aimed at creating uniformity and reducing administrative burdens on prescribing providers, carriers, and PBMs, as well as making the criteria used for deciding prior authorization requests transparent and establishing a procedure for waiving the process under extenuating circumstances.

To assist in developing the process, the commissioner is to appoint a work group of various stakeholders to make recommendations on specified aspects of the process that the commissioner is to consider, including national standards for electronic prior authorization.

Once the prior authorization process is established, the request is deemed granted if a carrier or PBM fails to use or accept the prior authorization process, fails to notify the prescribing provider within a specified period that the request is approved or denied or that additional information is required to process the request, or fails to notify the prescribing provider within a specified period after receipt of the required additional information that the request is approved or denied. An approved prior authorization is valid for at least 180 days after the date of approval.

The bill was introduced on April 16 and assigned to the Health & Human Services Committee. The bill is scheduled for committee review on April 25 at 1:30 p.m.

Since this summary, the Senate Committee on Health and Human Services referred the bill, unamended, for consideration on Second Reading in the Senate.

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HB 13-1266: Aligning Colorado Health Insurance Laws with Provisions of Federal Patient Protection and Affordable Care Act of 2010

April 11, 2013 by Leave a Comment

On March 18, 2013, Rep. Beth McCann and Sen. Irene Aguilar introduced HB 13-1266 – Concerning the Alignment of State Health Insurance Laws with the Requirements of the Federal “Patient Protection and Affordable Care Act.” This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill aligns the “Colorado Health Care Coverage Act” (Colorado law) with the federal ”Patient Protection and Affordable Care Act of 2010” and the federal “Health Care and Education Reconciliation Act of 2010” (federal law) to give the insurance commissioner the necessary authority to regulate health insurers with respect to new requirements of the federal law. The bill includes the following changes to Colorado law:

  • Makes defined terms in Colorado law consistent with the requirements of federal law;
  • Enacts the terms of Colorado’s essential health benefits package;
  • Conforms Colorado’s current mandatory coverage provisions to the requirements of federal law;
  • Requires all individual and small employer health insurance carriers selling health benefit plans in Colorado to issue and renew plans to all eligible individuals;
  • Conforms Colorado law to federal law requirements for dependent health coverage for persons under 26 years of age;
  • Prohibits discrimination against licensed or certified health care providers by health insurance carriers in the participation of health care providers in individual or group health benefit plans;
  • Conforms Colorado law regulating health insurance rates and the filing of health insurance plans to the requirements of federal law;
  • Aligns Colorado law with federal law for internal and external independent review of adverse determinations of health insurance carriers with respect to denial of benefits;
  • Consistent with federal law, prohibits carriers offering individual or small employer health benefit plans from imposing any preexisting condition exclusion with respect to coverage;
  • Makes wellness and prevention program requirements consistent with federal law;
  • Conforms carrier network adequacy requirements to federal law; and
  • Authorizes the insurance commissioner to adopt rules necessary to comply with requirements of federal law.

On March 28, the Health, Insurance & Environment Committee amended the bill and sent it to the floor of the House for consideration on 2nd Reading.

Since this summary, the bill passed Second Reading in the House with amendments, then passed Third Reading and was assigned to the Health & Human Services Committee in the Senate.

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Colorado Court of Appeals: Underinsured Motorist Benefits Only Triggered When Policy Limits Reached on Tortfeasor’s Liability Policy

April 5, 2013 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Jordan v. Safeco Insurance Company of America, Inc. on Thursday, March 28, 2013.

Summary Judgment—Underinsured Motorist Benefits.

Plaintiffs Philip and Roberta Jordan appealed the district court’s summary judgment in favor of defendant Safeco Insurance Company of America, Inc. (Safeco) on their claim that Safeco unreasonably denied them underinsured motorist (UIM) benefits. The judgment was affirmed.

In 2009, the Jordans were involved in an automobile accident with J.F., a minor driver. The Jordans were injured and sued J.F. J.F.’s automobile insurance policy covered damages for injury to others up to $100,000 per person or $300,000 per accident. The Jordans settled for $60,000 and $38,500, respectively.

The Jordans sought underinsured motorist (UIM) benefits under their policy with Safeco, asserting that the policy covered all damages unpaid under the settlements, up to the policy limit. Safeco maintained that their UIM coverage would be triggered only if either of them had damages exceeding the $100,000 limit of J.F.’s policy, which neither did.

The Jordans sued Safeco, asserting claims for (1) common law bad faith breach of an insurance contract; (2) unreasonable delay and denial of payment of a claim in violation of CRS §§ 10-3-1115 and -1116; and (3) deceptive trade practice in violation of the Colorado Consumer Protection Act (CCPA). The Jordans moved for summary judgment under their unreasonable delay claims, and Safeco moved for summary judgment on the same claims and the bad faith claim. The parties stipulated that neither could prove damages in excess of $100,000, and the court granted the Jordans’ motion to dismiss their own CCPA claim.

The court granted Safeco’s motion for summary judgment. On appeal, the Jordans challenged only the grant of summary judgment in favor of Safeco under CRS §§ 10-3-1115 and -1116 and conceded that no material facts were disputed.

The Court of Appeals concluded that Safeco’s denial of coverage was permissible under the clear language of the policy, as well as the unambiguous terms of CRS § 10-4-609. The policy language unambiguously provides that payment of UIM benefits are only for damages above the tortfeasor’s insurance policy liability limit. Here, the damages did not exceed those limits.

The Jordans also argued that under CRS § 10-4-609, an insured’s good faith settlement with a tortfeasor necessarily exhausts the tortfeasor’s liability limits. That section, as amended January 1, 2008, requires that UIM coverage “shall be in addition to any legal liability coverage and shall cover the difference, if any, between the amount of the limits of any legal liability coverage and the amount of the damages sustained.” This is plain and unambiguous language. The trigger is the exhaustion of the tortfeasor’s “limits of . . . legal liability coverage.” The judgment was affirmed.

Summary and full case available here.

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HB 13-1225: Creating the “Homeowner’s Insurance Reform Act of 2013″ and Changing Regulations Regarding Homeowner’s Insurance

April 4, 2013 by Leave a Comment

On February 7, 2013, Rep. Claire Levy and Sen. John Kefalas introduced HB 13-1225 – Concerning Additional Protections for Homeowner’s Insurance Policyholders in Colorado, and, in Connection Therewith, Enacting the “Homeowner’s Insurance Reform Act of 2013.” This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill makes the following changes to the laws regulating homeowner’s insurance for owner-occupied single-family homes other than mobile homes, condominiums, and manufactured homes:

  • Requires insurers to offer extended replacement cost coverage and law and ordinance coverage, with an explanation of the terms of this coverage;
  • Requires insurers to include at least one year of additional living expense coverage and to offer a total of 24 months of additional living expense coverage, with an explanation of the terms of this coverage;
  • Requires homeowner’s insurance policies, endorsements, and summary disclosure forms be written in plain language and revised by Jan. 1, 2015, to comply with this requirement;
  • Requires an insurer to consider an estimate from a licensed contractor or licensed architect submitted by the policyholder as the basis for establishing the replacement cost;
  • Specifies that policyholders have the right to a written notification, at renewal, describing changes in their insurance contract language that are applicable to the renewal period;
  • Requires insurers to provide an electronic or paper copy, as specified by the policyholder, of the policyholder’s insurance policy, including the declaration page and endorsements, within three business days after a request from an insured;

With respect to contents coverage in total loss claims, requires insurers to:

  • Offer to pay 30 percent of contents coverage reflected in the policy declaration, subject to policy limitations, without requiring a contents inventory;
  • Provide the basis for depreciation when applicable; and
  • Allow the policyholder up to 180 days after a total loss claim to submit an inventory of lost or damaged property, or 270 days if the Governor declares a disaster that results in the total loss of multiple dwellings; and
  • Allow a policyholder up to 180 days after expiration of alternative living expense coverage to replace property and receive recoverable depreciation on that property.

Requires a summary disclosure to be given to policyholders annually, including statements that:

  • The policyholder is responsible for selecting the amount of coverage;
  • The policyholder is responsible for assessing improvements to the home and notifying the insurer;
  • The policyholder may purchase additional coverage with appropriate documentation; and
  • The policyholder should update the inventory of contents regularly and store the inventory off-site.

Implements a continuing education requirement for insurance producers offering homeowner’s insurance policies to take at least three hours of continuing education on homeowner coverages during a two-year period.

Prohibits the enforcement of terms in homeowner’s insurance policies that require policyholders to sue insurers in cases of disputes within a shorter period of time than allowed for by the applicable statute of limitations.

The bill passed out of the House on March 18 and is assigned to the Local Government Committee in the Senate.

Since this summary, the Senate Committee on Local Government heard testimony and had committee discussion.

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Tenth Circuit: Jury’s Award in Breach of Insurance Contract Case Affirmed

March 28, 2013 by Leave a Comment

The Tenth Circuit published its opinion in Ryan Development Company v. Indiana Lumbermens Mutual Insurance Company on Wednesday, March 27, 2013.

This case arose from a fire that destroyed a Texas manufacturing facility in April 2009. The owner of the facility, Agriboard, manufactured building panels made of compressed straw. At the time of the fire, Agriboard was insured under a fire and related losses insurance policy issued by Indiana Lumbermens Mutual Insurance Company (“ILM”) with various coverages, including lost income. ILM paid $450,000. Agriboard sued ILM for breach of an insurance contract, and ILM paid $1.8 million. Agriboard continued to seek recovery under the policy, but ILM refused to pay the amount requested. Agriboard re-filed suit, seeking $2.4 million in unpaid coverage.

The jury awarded Agriboard $2,261,166 for breach of contract. ILM renewed its motion for judgment as a matter of law, or in the alternative, for a new trial, asserting four grounds for relief: (1) prejudicial remarks in Agriboard’s closing arguments; (2) confusing and inappropriate jury instructions; (3) inadmissible expert testimony; and (4) a verdict unsupported by the evidence. The trial court denied the motion. ILM appealed.

At issue on appeal was ILM’s motion for a new trial.

First, ILM argued it was entitled to a new trial because Agriboard’s accountants offered expert testimony after the trial court ruled in limine that such testimony was inadmissible. Because the district court admitted the accountants’ testimony under FRE 701, where a non-expert witness may offer opinions not based on scientific, technical, or other specialized knowledge within the scope of Rule 702, the Tenth Circuit held that the district court did not abuse its discretion in admitting the accountants’ testimony.

Second, ILM challenged certain jury instructions, asserting they were (1) inappropriate because Agriboard never elicited testimony that the policy was ambiguous, and (2) designed to confuse the jury. The Tenth Circuit’s review of the record confirmed the district court’s finding that the instructions on how to interpret an insurance policy and what to do when the policy and endorsement conflict were suitable for the jury.

Third, ILM argued a new trial was warranted because Agriboard’s counsel made improper remarks during closing arguments. The decision to grant a new trial based upon counsel’s misconduct is left largely to the discretion of the district court. A new trial is appropriate only if the moving party shows that it was prejudiced by the attorney misconduct. Because the jury was instructed that closing arguments are not evidence, any remarks were brief and unlikely affected Agriboard’s substantial rights, particularly given that the jury was instructed to follow the law as the judge explained.

Finally, ILM argued the verdict was not supported by the evidence. When a new trial motion asserts that the jury verdict is not supported by the evidence, the verdict must stand unless it is clearly, decidedly, or overwhelmingly against the weight of the evidence. Absent an award that shocks the judicial conscience or raises an irresistible inference that passion, prejudice, corruption or other improper cause played a part in the jury’s damage award, an appeals court will not disturb the jury’s damage award. Ample evidence was introduced at trial for the jury to conclude that ILM breached its contract. Thus, the trial court did not abuse its discretion.

AFFIRMED.

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SB 13-211: Requiring Notice of Termination of Homeowners’ Insurance Coverage to be Given by Certified Mail

March 27, 2013 by Leave a Comment

On Thursday, March 14, 2013, Sen. Rollie Heath introduced SB 13-211 – Concerning the Requirements for Notice of Termination of Homeowners’ Insurance Coverage. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Under current law, an insurer is required to give a policyholder notice of cancellation or nonrenewal of a policy of homeowner’s insurance, together with the reasons for the cancellation or nonrenewal, by first-class mail. The bill changes this requirement to specify that the notice must be given by certified mail. The bill also eliminates an obsolete cross reference. The bill is assigned to the Business, Labor, & Technology Committee.

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Colorado Court of Appeals: Issue Preclusion Does Not Bar Action of Insurer To Prove It Was Not Liable for Actions of Insured

March 8, 2013 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Shelter Mutual Insurance Co. v. Vaughn on Thursday, March 28, 2013.

Personal Injury—Intentional Acts Exclusion to Insurance—Issue Preclusion.

At a YMCA basketball game, Steven Vaughn, the father of a player, hit Alvin Miller, a referee, several times and injured him. Miller sued Vaughn for assault and battery. Shelter Mutual Insurance Company (Shelter) hired a lawyer to defend Vaughn under a reservation of rights. Miller amended his complaint to add a negligence claim. The assault and battery claim was dropped before trial. The jury found Vaughn negligent and awarded Miller damages.

Shelter filed a declaratory action, asserting that Vaughn’s intentional actions caused Miller’s injuries and therefore the judgment was not covered by Vaughn’s insurance policy. Vaughn argued that Shelter was precluded from claiming he acted intentionally given the jury verdict of negligence. The trial court disagreed, finding that the issue of whether Vaughn acted intentionally was not adjudicated at trial and Shelter’s interest was not identical to Vaughn’s. The court then found Vaughn’s actions were intentional and thus excluded under the policy. Only the ruling on issue preclusion was challenged on appeal.

Issue preclusion bars relitigation of issues actually litigated in and necessary to the outcome of a prior action. Of the four elements that must be proven, the Court of Appeals found two that were not. The Court found that Shelter was not in privity with Vaughn in the underlying trial. Although Shelter funded Vaughn’s defense, it was not a party to the litigation and its interests were not aligned with Vaughn’s. Vaughn wanted to deny all liability, but Shelter only wanted to prove that if Vaughn were liable, it was for intentional acts that would release it from its duty to indemnify. Shelter’s reservation of rights put Vaughn on notice of their divergent interests. The Court further held that Shelter did not have a full and fair opportunity to assert its own interests in the underlying trial and litigate the issue of whether Vaughn was negligent. Shelter’s interests conflicted with Vaughn’s interest.

In sum, issue preclusion will not bar an insurer from later denying coverage to its insured when the insurer defended the insured under a reservation of rights and the insurer had an interest in establishing a different set of facts than the insured in the underlying litigation. The judgment was affirmed.

Summary and full case available here.

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SB 13-166: Developing Standardized Rules for Use in Processing Medical Claims

March 8, 2013 by Leave a Comment

On Thursday, February 7, 2013, Sen. Irene Aguilar introduced SB 13-166 – Concerning the Development of Standardized Rules for Use in Processing Medical Claims, and, in Connection Therewith, Extending the Deadlines for Development and Implementation of the Standardized Rules, Authorizing an Appropriation of State Moneys to Help Fund the Development of the Rules, and Making an Appropriation. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

In 2010, the Department of Health Care Policy and Financing (department) was charged with creating a task force to help develop a standardized set of payment rules and claim edits for use by health care providers and payers in the processing of medical claims. The task force is to submit a final report and recommendations concerning the standardized set by Dec. 31, 2013. Commercial health plans are then required to implement the standardized set by Jan. 1, 2015, or according to a schedule outlined by the task force, and domestic, nonprofit health plans must implement the standards by Jan. 1, 2016. The bill extends each of those deadlines by one year.

Additionally, under current law, the task force, through an organization designated by the executive director of the department, is allowed to seek and accept monetary and in-kind gifts, grants, and donations to use in performing its functions. No state funds have been appropriated to fund the work of the task force.

The bill authorizes the general assembly to appropriate moneys, and appropriates $100,000 from the general fund, to the department for use by the task force in performing its functions. On Feb. 20, the Health & Human Services Committee approved the bill and sent it to the Appropriations Committee for consideration of the fiscal impact.

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HB 13-1115: Repealing CoverColorado Pursuant to Changes in Coverage Because of Health Care Reform

February 28, 2013 by Leave a Comment

On January 18, 2013, Rep. Beth McCann and Sen. Pat Steadman introduced HB 13-1115 - Concerning the Repeal of CoverColorado, and, in Connection Therewith, Terminating Health Care Coverage for All CoverColorado Participants Effective April 1, 2014, as Part of the Transition to Health Insurance Coverage Regardless of Preexisting Medical Conditions under the Federal “Patient Protection and Affordable Care Act.” This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill recognizes that as a result of the passage of health care reform by the federal government, Colorado residents termed “high risk” for purposes of health insurance coverage will be able to obtain health insurance coverage regardless of preexisting medical conditions. Therefore, there is no reason for the continued existence of the CoverColorado program.

The bill provides for the repeal of CoverColorado, effective March 31, 2015. Prior to the repeal, the bill requires the board of directors of CoverColorado to develop an orderly plan for cessation of the program including:

  • Cessation of enrollment of new participants for coverage after Dec. 1, 2013;
  • Termination of health care coverage for existing participants, effective April 1, 2014;
  • Payment or settlement of claims for covered services and all other outstanding liabilities by Dec. 31, 2014; and
  • By March 31, 2015, final disposition of all remaining funds in any account of the program.

On February 21, the Health, Insurance & Environment amended the bill and sent it to the Finance Committee for consideration.

Since this summary, the Finance Committee reviewed the bill and sent it unamended to Appropriations.

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Colorado Supreme Court: Pollution Exclusion Clause in Insurance Policy Bars Indemnification for Off-Premises Injuries

February 26, 2013 by Leave a Comment

The Colorado Supreme Court issued its opinion in Mountain States Mutual Casualty Co. v. Roinestad on Monday, February 25, 2013.

Insurance—Duty to Indemnify—Pollution Exclusion Clauses.

Respondents were overcome by poisonous hydrogen sulfide gas while cleaning a large grease clog in a sewer near the Hog’s Breath Saloon & Restaurant. The district court concluded that the restaurant caused respondents’ injuries by dumping substantial amounts of cooking grease into the sewer. On summary judgment, the district court found the restaurant liable under theories of negligence and off-premises liability, and entered a damage award in respondents’ favor.

Mountain States Mutual Casualty Company sought a ruling that it had no obligation to indemnify the restaurant and the district court agreed, holding that dumping substantial amounts of cooking grease constituted a discharge of a pollutant under the policy’s pollution exclusion clause. The court of appeals reversed. It held that the terms of the pollution exclusion clause were ambiguous and that its application to cooking grease could lead to absurd results and negate essential coverage.

The Supreme Court reversed the judgment of the court of appeals. The restaurant discharged enough cooking grease into the sewer system to create a five- to eight-foot clog that led to a dangerous buildup of toxic gas—conduct that violated a city ordinance prohibiting the discharge of a pollutant in an amount that creates an obstruction to the sewer flow. The Court agreed with the district court that, under the circumstances of this case, the discharge of cooking grease amounted to a discharge of a pollutant. Accordingly, the Court held that the pollution exclusion clause barred coverage in this case.

Summary and full case available here.

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SB 13-124: Amending Definition of “Intermediary” to Hold Intermediaries to the Same Standards as Carriers Regarding Prompt Claim Payment

February 24, 2013 by Leave a Comment

On Tuesday, January 29, 2013, Sen. John Kefalas introduced SB 13-124 – Concerning Requirements of Intermediaries in the Business of Insurance, and, in Connection Therewith, Enacting the “Consumer Protection Act of 2013.” This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill adds to the definition of “intermediary” specific functions that an intermediary performs. Intermediaries are held to the same standards as carriers regarding prompt payment of claims. The bill allows the commissioner of insurance to investigate complaints against intermediaries that fail to comply. It also prohibits specific acts by intermediaries and defines the willful violation of the prohibitions as an unfair method of competition and an unfair or deceptive act in the business of insurance. The bill is assigned to the Business, Labor, & Technology Committee.

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Colorado Court of Appeals: Bashor-type Agreement Upheld as Permissible; Summary Judgment Reversed

February 19, 2013 by Leave a Comment

The Colorado Court of Appeals issued its opinion in DC-10 Entertainment, LLC v. Manor Insurance Agency, Inc. on Thursday, February 14, 2013.

Insurance Coverage—Broker—Damages—Assignment of Claims—Assault and Battery Exclusion—Negligent Misrepresentation.

DC-10 Entertainment, LLC (DC-10) appealed the trial court’s summary judgment in favor of Manor Insurance Agency, Inc. (Manor). The judgment was reversed and the case was remanded for further proceedings.

DC-10, a nightclub and lounge, obtained insurance coverage through Manor, an independent insurance broker that services multiple insurance companies. Through Manor, DC-10 procured a commercial general liability policy with Penn-Star Insurance Company (Penn-Star) and a liquor liability policy with Founders Insurance Company (Founders).

Heaven Henderson suffered injuries when she was physically assaulted by an unknown assailant on DC-10’s premises. Henderson sued DC-10. DC-10 then submitted claims to Penn-Star and Founders for defense and indemnity coverage. Both companies denied the claim because the policies contained an assault and battery exclusion. DC-10 settled with Henderson and then sued Manor, asserting claims of negligence and negligent misrepresentation. The court granted Manor’s motion for summary judgment.

DC-10 contended the trial court erred in determining that the settlement agreement was insufficient to establish that DC-10 incurred damages. Because the agreement does not contain a pretrial stipulated damages award, DC-10 did not bear the burden of proving the reasonableness of the judgment. Instead, the burden shifted to Manor to prove that the damages award, as determined by the arbitration judge, was unreasonable. In challenging the reasonableness of the damages award, Manor also may raise the affirmative defense of collusion or fraud. Because these are factual issues, the trial court erred in granting summary judgment.

Manor challenged the enforceability of an assignment of proceeds of negligence claims against an insurance broker. Manor owed a duty to DC-10 to obtain the insurance coverage that DC-10 requested. An assignment of claims against an insurance broker, where the claim arises from a commercial transaction and the insured has the same expectations of the insurance broker that he or she would have of the insurer, is not prohibited. Accordingly, DC-10’s assignment of the proceeds from its negligence and negligent misrepresentation claims against Manor to Henderson, the injured third party, was enforceable.

Finally, Manor contended that DC-10’s negligence and negligent misrepresentations claims failed as a matter of law because DC-10 did not present evidence that assault and battery coverage, if obtained, would have covered the alleged patron-on-patron assault in the underlying lawsuit. Because the availability of coverage sought by DC-10 remained a disputed factual question, Manor did not meet its burden of proof on this issue on its motion for summary judgment.

Summary and full case available here.

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