Host Sean Harris talks with plaintiff attorney and OAJ’s Insurance Law Section Chair, Bob Kerpsack, about his recent article, Ohio Insurance Law: A Throwback Perspective on the Past, Present & Future.
Sean: Hello and welcome to Civilly Speaking, OAJ’s monthly podcast on practical and timely legal issues, I am your host Sean Harris. Our guest today is Columbus attorney Bob Kerpsack, who is a solo practitioner here in Columbus. Bob, good morning to you.
Bob: Good morning Sean. Thank you very much for having me. I noticed that most of your guests that you have the first name Bob so I follow in a long line of good Bob’s.
Sean: That’s what we try and keep it limited to and so you are one in the long line of many. Bob Kerpsack was nice enough to write an article for the OAJ Insurance Law section and we’re going to talk about the topic of that article today, Ohio Insurance Law: A Throwback Perspective on the Past, Present & Future and Bob you have a unique perspective on this because you are both a current and past chair of the OAJ Insurance Law section.
Bob: That’s true almost about 20 years ago now I was the chair of the section and I get to do it again.
Sean: On the topic of underinsured motorist’s law, perhaps no where has there been more changes in Ohio when it comes to UM and UMI coverage. Tell us about, quote, the good old days what it used to be like and show us how far we’ve come today.
Bob: Well if we go back about 25 years ago, no doubt uninsured motorists coverage law was the hot bed of litigation here in Ohio. If you go back to the early 1990s, throughout the 1990s and into the 2000s, insurance coverage by operation of law was most trial courts were just filled with civil litigation on those topics and most of that stemmed from the mandatory express offering and rejection of uninsured motorist coverage under Ohio’s statute at the time, R.C 3739.18 and this law evolved and we found that the definition of motor vehicle liability insurance policies to which this mandatory offering of uninsured motorist coverage was required. It expanded to home owners policies, commercial general liability policies and umbrella policies and then it expanded further that to business auto policies where we found that the insureds under these policies of these corporate employers were in fact the employees as well as the family members of the employees, and all of this kind of came to a head and about 2003 when the state legislature did away with the mandatory offering of uninsured motorists coverage and eventually the Ohio Supreme Court fell into place a few years later where this mandatory offering of uninsured motorist coverage is no longer required so now we enter the era of negotiated uninsured motorist coverage where..
Sean: And let me stop you there and unpack because you gave us a lot there to work with. When we talk about mandatory offering, could it be that Ohio law used to regard underinsured motorists as an important insurance coverage, one grounded in an important and strong public policy?
Bob: Absolutely. You know we think in terms of consumer friendly legislation and consumer friendly case law and that was really the hallmark of the 1990s and early 2000s, but then we start getting into the anti-consumer eras and we now negotiate as consumers with our liability insurance companies, which we all know is one of the biggest fallacies on the face of the earth.
Sean: And you mentioned this curious idea that an employee would be covered under their employer’s automobile policy, what was that all about?
Bob: Well that stemmed to kind of the ambiguity of the definition of the insurers under the policy because corporate employees were defined as you, but then the next paragraph would say not only are you insured under this policy, but also your family members, and they used the forms that the insurance industries adopted primarily for commercial policies or consumer policies and bleeded them into the commercial policies. So in fact corporate employee’s family members were actually the insureds under the employer’s commercial policies.
Sean: Yeah, I remember in the old days having to call up my client’s employer and my client’s family member’s employer’s and ask for copies of their auto policies and they said, but Sean he wasn’t on the job. I said I know, I just need to see your insurance policy.
Bob: And well that raises another body of law whether they need to be in the course and scope of their employment at the time of the collision and the case law that developed that they did not because it just was not part of the definition of who was insured in motor vehicle liability insurance policy and the mandatory offering and express rejection of uninsured motorists coverage so all of this kind of was thrown out the door when the legislature said enough and we are going to do away with this mandatory offering of uninsured motorist coverage and we get into that anti-consumer as opposed to pro-consumer era here in the state of Ohio.
Sean: And you mentioned to that there was kind of this back and forth, this intuitional struggle between the Supreme Court on one hand and the legislature on the other where there would be a reaction right the Supreme Court would issue a decision and then the legislature would pass legislation in response theoretically superceding that Supreme Court Decision.
Bob: Absolutely, I mean the insurance lobby is a strong lobby at the legislature and every time the Supreme Court would come out with a decision where they had to pay money under their policy they would immediately run to the legislator who would, quote, fix the problem.
Sean: And I think even heard you mention that at some point home owners policies arguably even offered or were found to have included under insured motorist coverage.
Bob: That’s true because there are elements of motor vehicles that are covered under home owners policies so they were found by several appellate courts here in the state of Ohio to also be subject to that mandatory offering or express offering of rejection of uninsured motorist coverage, but once this all kind of came to an end in probably about 2007, we kind of came into a different era and we get into kind of the subrogation era and a lot related there to federal deficit reduction act of 2005 where Medicare and Medicaid started to become much more aggressive, is probably the right word in trying to get back or be reimbursed for disbursements to the Medicare beneficiaries and about the same time because of everybody’s health insurance was starting to sky rocket, a lot of employers went away from the fully insured plans and moved into these self-funded employee benefit plans that were set up under the ERISA or the Employee Retirement Income Security Act of 1974 and so now we get into a whole new body of law that is a rather anti-consumer again and so we struggle with this for the last several years kind of between 2007 up until about maybe 2013 where the issue finally gets to the U.S. Supreme Court as to whether ERISA self-funded plans actually can come in and essentially take a consumers entire personal injury settlement and the McCutchen case that came out of the U.S. Supreme Court in 2013 upheld a new term of art equitable lien by agreement and essentially all the equitable defenses that we have like Make Whole or Common Fund or any of these other pro-consumer type defenses that we have traditionally here in the state of Ohio, they cannot alter the unambiguous terms of a written plan document. But there was a strange twist in in McCutchen, which was that everybody in a case including in the U.S. Supreme Court assumed that there was this subrogation or reimbursement clause in the actual plan doc and below and behold that was actually only contained in the summary plan description, not the actual plan document, so we have this ground breaking case that comes out of the U.S. Supreme Court, which is talking about a non-contract if you will and when it went back we realized that it’s not the plan document that had this reimbursement provision that was unambiguous, it was in fact an added summary plan description which does not establish the terms and conditions of the ERISA plan.
Sean: And break those terms down for us when you are talking about the summary plan versus the actual policy itself.
Bob: Well, it’s not really a policy, it’s a plan and it’s a contract and it’s basically the rights and responsibilities of the employer and the employee under this plan, and then it is such a large document and a convoluted document that somebody comes along and says well we need to break this down in laments terms and we are going to put this in a summary plan description, but what frequently occurs is that the drafters of the summary plan description write what they want the plan language to read and not necessarily what the plan language actually says and that’s why you find frequently subrogation and reimbursement clauses kind of morphing into the summary plan descriptions.
Sean: Is it fair to say that McCutchen and its holding mirrors the Ohio Supreme Court’s decision in the Lawson case such that the language in the document is going to control?
Bob: Well that’s true, but the fun fact in Lawson was that there was a reimbursement provision that the insured was asked to sign after the injuries were incurred and the reimbursement provision actually gave the plan or policy more rights than it had under the actual plan, but because the insured had signed the reimbursement provision it did actually give them those additional rights under the plan.
Sean: Now Bob I also see you mention another, I believe it is a United State Supreme Court case, Montanile?
Bob: Correct, Montanile versus Board of Trustees of the National Elevator Industry Health and Benefit Plan and that brings us up here to 2016 and we find that when the ERISA plan participant, they use the word dissipates, the tort settlement on non-traceable funds like food services and travel the plan may not bring suit to attach the participants separate assets because that is not in the words of the ERISA statute appropriate equitable relief that’s actually authorized by ERISA. So we see now the U.S. Supreme Court starting to get a little more pro-consumer now on these ERISA cases where the person just spends down the money on non-traceable assets, but the caveat to that is a case that came out a few years ago here in the 6th circuit Court of Appeals, the Longaberger vs. Kolt, KOLT case and in that particular case the 6th U.S. Circuit found that the personal injury attorneys contingent fee was actually a traceable item and the ERISA plan could attach the contingent fee that was taken even after the case was over and the fee was spent down so to speak, in other words you can’t spend down a traceable asset, like a contingent attorney fee. So we find ourselves that we’re even in this area of consumer friendly federal and state subrogation, an ERISA plan still can micro manage these things and we’re just now starting to get into a little more consumer friendly era and that brings us back here to the state of Ohio where we’ve now got a consumer friendly anti-subrogation statute, which is falling in line with many of the other states across the country so that we can now apply the state law to not only the fully insured plan, but also to some of these ERISA plans.
Sean: I note that you referred to as the anti-subrogation’s statute I think we have all kind of fallen into the habit of referring to it as, hey we got this subrogation statute passed when to your point, because words matter, it really is preventing subrogation.
Bob: It does, the policy of the plans frequently is that if an insured receives a tort settlement the plan stands in line first to get its money and reimbursement before the insured gets its money and the anti-subrogation statute say no that’s not quite the way it should be, everybody should get a pro rata share of a limited recovery or everybody should get an equitable distribution of that limited share and it’s not really whose first in line, whose second in line, everybody should be in line together.
Sean: Bob do you have any sense, I mean you’ve described this 2016 United States Supreme Court decision, the recent anti-subrogation statute here in Ohio, do you have any sense as to what’s driving this kind of push back or the pro-consumer movement?
Bob: Well, fundamental fairness would be my best guess, that when you stand back and you try to be intellectually honest it stands to reason that the consumer should be the one who ultimately gets the biggest piece of the limited pie and we are starting to see state legislators across the country enact these state anti-subrogation statutes and we are also starting to see the federal court system uphold this state law to ERISA plans that historically preempts state law. For instance, we have a case, Roush versus Etna that just came out from the 3rd U.S Circuit Court of Appeals in March of 2016 that said that New Jersey’s anti-subrogation statute does in fact apply to a self-funded ERISA plan and so everybody gets that pro-rata sharing and similarly the New York anti-subrogation statute in fact is saved the words under the ERISA statute from the preemption. So we have now seen a couple of important states and we would hope that Ohio’s anti-subrogation statute to, would be found not to be preempted because in fact it says in the Ohio statute that it does apply to any kind of self-funded plans.
Sean: What do you see coming down the road in the area of Medicare advantage plans?
Bob: Well Medicare advantage plans are basically Medicare HMOs. A private insurance company comes in and fills the role of Medicare in administering the benefits and there has been a real hot bed of litigation as to whether or not the Medicare advantage plans, which again are private insurance companies, have the same type of super lien that Medicare itself or a CMS would have and historically and particularly here in the 6th U.S Circuit Court of Appeals in the Engstrom case back in 2003 they found that Medicare advantage plans are not traditional Medicare and do not have the super lien status that Medicare would have, but we’re now finding, in some of these other more recent cases after some amendments in the past couple of years to the Medicare statutes , the federal Medicare statutes that Medicare advantage plans are in fact on the same plane and have the same super liens as the Medicare plans.
Sean: While we are on the topic of insurance and looking into the future, have you encountered arguments from the defense in any of your cases regarding future medical costs as they involve the affordable care act?
Bob: Yes, what we have is situations where these Medicare plans or Medicare advantage plans are going to be spending money into the future and under these plans you are supposed to set aside some funds to continue to reimburse these plans for moneys that are reasonably planned to be expended the future and it’s interesting that the administration of that process is extremely cumbersome and is extremely difficult to set up these types of payment structures and so by in large at this particular point in time in 2016 these Medicare set asides are not being used for anything other than workers’ compensation settlements right now, but we are starting to see and I would expect in the next year or so that they are going to come more and more used in the tort recovery system.
Sean: Bob what’s the view from 30,000 feet, which way is the pendulum swinging and what should we look out for?
Bob: Well, I think some of the darkest days of Insurance law here in Ohio and across the country for that matter are kind of behind us, and we have been in the dark days of insurance law for about the last decade or so, and I am hopefully optimistic that we can see light at the end of the tunnel, and I am just now starting to get excited again that I can actually do some help for my clients and I think that all of us lawyers are going to be back in the saddle so to speak, and being able to actually do some good for our clients and let them walk away with the biggest piece of the pie when all things are said and done.
Sean: Imagine that.
Bob: Imagine that.
Sean: Bob Kerpsack thanks very much for joining us here on Civilly Speaking.
Bob: My privilege and thank you very much.