Missouri On Track to Reform Interpleader Law: House Bill 1531 Unanimously Approved by the Senate

Laura Gerdes Long

By Laura Gerdes Long



co-authored by Laura Gerdes Long and Katherine M. Flett

As he was leaving office, Missouri Governor Eric Greitens signed at least 77 bills into law, including House Bill 1531, which may protect insurance carriers subjected to purported bad faith claims.

“Interpleader” is a civil procedure vehicle used to force claimants to litigate a dispute involving two or more claims to a limited amount of money held by a third party, such as an insurance carrier.  A common example is when multiple people are injured in a car accident and the injuries exceed the amount covered by the tortfeasor’s policy limits.  What should the insurance carrier do?

Under the prior law, codified at Section 507.060 RSMo, the tortfeasor’s insurer could interplead the policy limits, but the insurer would remain subject to a purported bad faith claim.  This would put insurers in an impossible situation, choosing between paying claims on a first-come, first-serve basis to avoid time-based bad faith claims, paying the limits on the most seriously injured claim, or gathering all of the claimants’ documentation supporting their injuries or damages in an attempt to globally resolve all claims within the policy limits, and reducing the insured’s exposure to excess claims.

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Recent Illinois and Missouri Supreme Court Decisions Reduce Litigation Risks of Companies Operating in Multiple States

Michael J. McKitrick

By Michael J. McKitrick



Authored by Michael J. McKitrick with contribution from David A. Zobel

On September 21, 2017, the Illinois Supreme Court handed down its decision in Aspen American Insurance Company v. Interstate Warehousing, Inc, greatly limiting the ability of plaintiffs to sue foreign corporations in Illinois simply because the corporation is registered to do business in and may have minimal contacts with Illinois. As described below, the decision joins Illinois with a nationwide trend disfavoring forum-shopping – a practice in which plaintiffs bring suit against defendants in plaintiff-friendly venues unrelated to the defendant’s contacts and the injury giving rise to the action.

The Aspen case concerned a claim filed in Illinois by a plaintiff who had been injured in a fire which occurred in Indiana. The defendant corporation was incorporated in and maintained its principal place of business in Indiana, although it did maintain a warehouse in Illinois and was also registered to do business in Illinois. The defendant corporation moved to dismiss the lawsuit for lack of proper jurisdiction as a result of these facts and the Circuit Court agreed. On appeal, the plaintiff argued that maintenance of a warehouse in Illinois and being registered as a foreign corporation in Illinois was sufficient to impart general jurisdiction over the corporation. Continue reading »

Insurance Considerations

David A. Zobel

By David A. Zobel



Authored by David A. Zobel with contribution from Michael J. McKitrick

Part 9 of a 12-part series on Legal Considerations for Your Missouri Leasing Business: What You Should Consider Now, Later, and Throughout the Process

As a caveat to this discussion on insurance, we recommend that you consult with an independent insurance agent/broker to ensure that you obtain the most appropriate type and extent of insurance coverage that your specific business will need.

Having said that, there are some general insurance issues every residential or commercial leasing business should consider.

First, foremost, and fundamentally – don’t skip over insurance and do not assume your personal policies will cover your company’s property or operations.  Most personal policies do not cover businesses. Continue reading »

Statutory Changes in Missouri Lead to Blue Skies Ahead for Insurance Companies Facing Bad Faith Set-Ups and Collateral Source Rule Issues

Laura Gerdes Long

By Laura Gerdes Long



Recent legislation signed by Missouri Governor Eric Greitens is expected to promise procedural relief from bad faith set-ups in Missouri as well as provide clarity regarding the collateral source rule.

New Legislation Affecting Bad Faith Set-Ups

Section 537.065 of the Missouri Revised Statutes allows claimants and insureds to contract to limit recovery to insurance coverage. This statute is unique to Missouri, as no other states have established such a practice by statute. Typically, the insured, while knowing that he will not be held personally responsible, agrees to either settle the claim or to not legally oppose the tort victim’s prosecution of the claim at trial. Post-trial the insurer is limited to disputing only the legal conclusion of whether coverage existed and usually barred from re-litigating any other aspect of the suit. These agreements are often used to pressure the insurance company into providing a defense where there may not be coverage or to pay policy limits on questionable claims.  They are also used as schemes whereby insureds and claimants work in concert to obtain coverage and create inflated damage awards at uncontested bench trials.

Effective August 28, 2017, Missouri House Bills 339 and 714 repeal section 537.065 and enact a new section 537.058, as well as a revised section 537.065 (as signed by Gov. Greitens). The new law will help curb the abuses associated with section 537.065 agreements by allowing insurers to intervene in underlying lawsuits. By participating in the underlying lawsuit, the insurer will be able to present a more accurate picture on liability, damages, and coverage issues. The bills further provide that an insured cannot enter into such a settlement agreement with a claimant if the insurer is providing the insured a defense without reservation, under the reasoning that an insured should not be allowed to enter into an unauthorized settlement agreement if an insurer defends without qualification. When an insurer defends under the policy, the insurer is fulfilling its policy obligations and should expect the insured to comply with its corresponding policy obligations, including the duty to cooperate and refusal to pay provisions.  As such, section 537.065, as amended, adds the following procedural protections: Continue reading »

Operational Considerations – Purchasing Real Estate – Title Insurance

David A. Zobel

By David A. Zobel



Part 5 of a 12-part series by David A. Zobel on Legal Considerations for Your Missouri Leasing Business: What You Should Consider Now, Later, and Throughout the Process

Once you’ve established your legal entity, the next step will be to purchase the real estate you wish to lease (or invest in). The appropriate type of real estate for your business will vary depending on a number of factors, including your location, level of investment, and potential tenant base. Not surprisingly, thorough research, inspections, and planning are critical to ensuring success. In this and the next two posts in this series, we’ll outline several important issues at this juncture: title insurance, indenture review, and ensuring appropriate loan documentation.

Title Insurance

When you purchase real estate you may be purchasing more (and maybe less) than the land and improvements you actually see. The land is likely encumbered by third parties who may have rights (possibly superior to your rights) to your land which could restrict your use and ownership in various ways. Encumbrances can be minor, such as a minimum set-back restrictions simply preventing owners from building up to a property line, but others can be more severe, such as utility or access easements, and even unreleased mortgages and liens – requiring the purchaser to pay up or lose the property. Continue reading »

Is Your Property Insured Against a Riot?

David A. Zobel

By David A. Zobel



The current unrest facing the St. Louis metropolitan region carries with it the elevated risk of damage and/or destruction of both real and personal property. While everyone intends and hopes their insurance policies cover all eventualities that may arise, the truth of the matter is that not all eventualities are covered by insurance.

Unfortunately, it is generally only after something truly unexpected happens that policies are reviewed and tested for actual coverage. At that moment, it may be too late to both prepare for the event and/or adjust coverage.

As a result, it may be wise now to pull out your current auto, homeowners, renters, commercial or other similar policies to review each policy’s specific language.

One of the coverage limitations to consider are so-called “force majeure” clauses. “Force majeure” is a contractual term that relieves parties from performing their contractual obligations when certain circumstances beyond their control arise, often making their performance under the contract impractical or impossible. Examples of these circumstances can include earthquakes, war, strikes, epidemics, acts of God, and riots. Continue reading »

Unemployment Insurance in Missouri: Should Employers Respond to Claim Notices?

Ruth Binger

By Ruth Binger



New regulations require Missouri employers to respond timely to information requests regarding unemployment insurance compensation. The federal Trade Adjustment Assistance Extension Act (“TAAEA” or the “Act”) of 2011 requires, among other things, that states increase employers’ duties regarding unemployment compensation claims. Specifically, the Act provides that states must require employers to respond timely and adequately to Claim Notices, information requests from state agencies relating to unemployment benefit compensation claims. It also requires states to charge the unemployment accounts of employers that repeatedly fail to respond to Claim Notices for unemployment benefits paid to ineligible former employees.

In Missouri, an employee that satisfies all the unemployment insurance benefit eligibility requirements may still be disqualified from receiving benefits for voluntarily quitting without good cause or for being discharged for work misconduct. Once a terminated employee files a claim for unemployment benefits, the Missouri Division of Employment Security (“DES”) mails the former employer a Claim Notice, which requires a response within 10 days. The Claim Notice permits the employer to protest an unemployment benefits claim because the former employee quit voluntarily or was discharged for misconduct. If the claim is not in dispute, the employer must still respond to acknowledge the claim.

Some employers routinely fail to respond to Claim Notices. They may systematically choose not to respond to Claim Notices to avoid becoming involved in a former employee’s benefits appeal. Continue reading »

New Illinois Recording Law Designed to Combat Fraudulent Filings Likely to Have Immediate Impact on Title Insurance Industry

David A. Zobel

By David A. Zobel



Illinois recorder of deeds offices are now authorized to implement fraud referral and review processes to detect and address fraudulent recorded instruments in their counties with the recent passage of Illinois House Bill 2832 (55 ILCS 5/3-5010.5).

The new law identifies 19 separate indications of potential fraud, but county recorders are each free to create a unique detection system for their county. Under these systems, once the recorder reasonably determines an instrument to be “fraudulent, unlawfully altered, or intended to unlawfully cloud or transfer the title of any real estate property,” the law affords the recorder two distinct courses of action.

First, recorder personnel may, at their own discretion, notify law enforcement officials, including the Department of Financial and Professional regulation, of the suspected fraud and request assistance for further review and potential criminal investigation.

Second, the recorder may, upon notice and confirmation of the potential fraud with the last owner of record, flag and refer the instrument to a local administrative law judge for hearing. If that judge determines the instrument to be legitimate, a judgment stating so would then be recorded along with the original instrument. However, if determined to be fraudulent, a judgment stating “that the document in question has been found to be fraudulent and shall not be considered to affect the chain of title of the property in any way” would then be recorded with the original instrument. No documents, regardless of legitimacy, would be “unrecorded” or struck from the county records.

Like many new laws, this new recording law is not without controversy. Proponents praise the law as an expedited and cost-effective alternative to filing a lawsuit to clear a victim’s title. However, critics complain the law unconstitutionally expands the powers of county recorders and may lead to unforeseen consequences in the recovering real estate industry.

While the ultimate effect (and constitutionality) of the new law remains to be seen, the law will almost certainly have an immediate impact on Illinois title companies. In some cases, it may lead to longer and more expensive administrative review and closing periods as title companies may be reluctant to insure any title during an active review/referral process. However, in others, the law’s finality in determining the legitimacy of unusual instruments in a chain of title may lead to decreased risks borne by title companies and thus decreased costs borne by the consumer.

Either way, the new law’s application and effect will certainly need to be considered by companies seeking to insure title in Illinois.

Posted by Attorney David A. Zobel. Zobel primarily represents individuals and corporations in the defense of civil litigation, including contract, negligence, and real estate matters. In addition to his court room work, Zobel assists in advising clients on contract and employment issues and regarding issues arising under the Sunshine Law.

 

ERISA, FEHBA, Medicare (CMS) and Personal Injury claims

Brian Weinstock

By Brian Weinstock



Whether you are a plaintiff or defendant with regard to a personal injury claim, it is important to determine whether there are any issues with respect to ERISA, FEHBA and Medicare.

Employee Retirement Income Security Act of 1974 (ERISA)is federal law which establishes minimum standards for pension plans in private industry and includes extensive rules with regard to federal income tax effects of transactions associated with employee benefit plans. Congress established this law with the intent to protect the interests of participants in employee benefits plans and their beneficiaries by requiring financial disclosure to them, establishing fiduciary duties with respect to the plans and allowing access to federal courts to obtain remedies. ERISA addresses pension plans in detail but also effects health care plans. Thus, ERISA applies to all employee welfare benefit plans offered by private sector employers or unions whether offered through insurance or a self-funded arrangement. ERISA’s preemption clause states that ERISA “shall supersede any and all state laws insofar as they relate to any employee benefit plan” which would include a health care plan.

Under an ERISA plan such as a self-funded health and welfare fund, i.e. union health insurance, a plaintiff can recover benefits due under the terms of the plan, enforce rights under the plan and receive a clarification of rights to future benefits under a plan. These health care plans outline when a participant must repay them. These plans typically include language such as when “you or your Dependent achieve any recovery whatsoever, through a legal action or settlement in connection with any sickness or injury alleged to have been caused by a third-party, regardless of whether or not some or all of the amount recovered was specifically for medicalor dental expenses for which Plan benefits were paid.” Moreover, it is not uncommon for the ERISA plan fiduciaries to require a beneficiary to sign additional documents before making any payment to a health care provider with respect to medical care for alleged injuries from a personal injury claim. These additional documents typically contain language which includes “I understand that the Fund must be reimbursed for medical benefits or for any benefits paid as a result of an injury or illness if any recovery is made for that injury or illness.” For example, a plaintiff in a state claim may have health insurance through a self-funded health and welfare fund.

If the health and welfare fund were to make payments to medical providers on behalf of the plan participant with respect to a personal injury claim, the health and welfare fund would be entitled to obtain reimbursement for all funds which were paid out to the medical providers. If the Fund was not reimbursed all the benefits that they paid on the claim, the fund would have the right to file a federal lawsuit seeking reimbursement of the funds they paid out on behalf of the plan participant. In practice, the fund would sue the former state claim plaintiff who is actually a plan participant. If this happens, the former plaintiff now turned defendant will most likely call their former attorney and sue them as well as the insurer, who insured the defendant in the state law claim, as third-party defendants in the ERISA case. A judgment in favor of the fund would require the former state law plaintiff to reimburse all funds their healthcare plan paid on their behalf as well as any other damages allowed under federal statute for ERISA claims such as attorney fees, interest and costs. It could be easy to overlook a potential ERISA claim; especially, if the plaintiff in the state claim is a dependent under an ERISA plan.

The Federal Employees Health Benefits Act (“FEHBA”)established a program to provide federal employees, federal retirees and their eligible family members with subsidized health care benefits. FEHBA has a broad preemption clause which is similar to the preemption clause in ERISA. Since the clauses are similar and because there is limited federal case law with respect to FEHBA, courts generally refer to decisions regarding ERISA’s preemption clause for guidance. A majority of federal courts have concluded the FEHBA preempts state law claims just like ERISA. Again, it is important to determine whether the plaintiff in the state claim is a direct beneficiary or dependent under a FEHBA plan in order to protect the FEHBA lien to avoid any further litigation to enforce the lien in federal court.

The Centers for Medicare and Medicaid Services (“CMS”) handles Medicare claims. With respect to workers compensation claims, CMS has established guidelines, such as being a current Medicare beneficiary, as to when CMS interests must be taken into account before the claim can be settled. If the plaintiff meets the threshold criteria for reporting to Medicare, the parties would be required to submit a proposal to CMS outlining various issues including the plaintiff’s injuries, their treatment, current physical condition and any expected future treatment arising from their injuries including prescription medication. CMS will review the proposal and make a determination as to what if any funds need to be placed in a Medicare Set-Aside trust to pay for future medical treatment related to the alleged accident. Besides being a current Medicare beneficiary, CMS has established other thresholds which require one to take into account Medicare’s interests before a workers compensation claim is settled.

If one fails to take into account Medicare’s interest, Medicare can deny medical benefits to the injured party for their injuries at any time in the future once they become a Medicare beneficiary. If one fails to take into account CMS’s interests with respect to their thresholds then CMS is authorized to file a lawsuit against “any entity” including a beneficiary, provider, supplier, physician, attorney, state agency or private insurer that has received any portion of a third party payment directly or indirectly if those third party funds should have been paid for injury related medical expenses. Moreover, any plaintiff attorney who fails to properly recognize Medicare’s interests can be liable for double damages. With regard to liability claims, liability insurance, including self insurance, no fault insurance and workers compensation insurance must register electronically with CMS by September 30, 2009. As of January 1, 2010 claims must be tracked by the insurers to determine whether injured parties are Medicare beneficiaries. All parties have to report these claims to CMS as of April 1, 2010.

Dating back to January 1, 2010, if a liability insurer obtained a lump sum settlement with a Medicare beneficiary for $5,000 or more, Medicare must be notified so that they are allowed to determine whether a Medicare Set-Aside trust must be established for the plaintiff with respect to future medical treatment for any of the injuries allegedly related to the liability claim. At this time, CMS has no plans for a formal set-aside process with respect to liability claims but it will review and approve Medicare Set-Aside trust accounts for liability claims. For every day that CMS is not notified, there is a $1,000 per day penalty for insurance carriers who fail to report settlements to Medicare within 60 days of payment. It is important to note that CMS is constantly issuing memorandums updating their policies and procedures with respect to Medicare Set-Aside trusts; thus, Medicare could ultimately issue a formal set of procedures for Medicare Set-Aside trusts for liability claims.

In conclusion, it is extremely important to determine whether there is an ERISA, FEHBA or Medicare issue with respect to a personal injury claim.

Selling Away: You and Your RR Can Both Be Honest and Still Be Liable to Someone Who is Not

Joseph R. Soraghan

By Joseph R. Soraghan



“Selling away”, as you know, occurs when an RR invests his client’s money without doing so at or through the brokerage firm at which he is employed. Although it occurs in all types of brokerage situations, it occurs most frequently in non-traditional, generally off-site situations. According to the NASD, selling away is the most frequently committed violation by off-site RRs. For example, RRs who also sell insurance products frequently operate in off-site locations, and selling away frequently occurs on the part of independent insurance agents registered only as Series 6 investment company and variable contract products representatives. These RRs are frequently targeted by issuers, promoters and marketing agents to sell variable contracts and promissory notes to their customers. In many instances these products constitute securities, but their promoters market them to RRs as non-securities products that do not have to be sold through the RR’s broker-dealer.

“Selling away”, also known as “private securities transactions”, is a violation by the RR of his obligation to submit to the supervision of his BD, and to allow it is a violation by the BD of its duty to supervise all securities transactions by the RR. “Selling away” is easy to do even without knowing it.

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