The basics of California Appeals — two not-so-simple rules

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The basics of California Appeals — two not-so-simple rules: Filing a timely notice of appeal and designating a proper record

By Jeffrey Isaac Ehrlich, 2010 | Download .doc

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Landmark California AppealsSuccess on appeal in California depends on many things — the facts that underlie your case, the legal positions you can take in light of the state of the law, your skill in selecting and presenting the issues to the appellate court in a persuasive way, and the beliefs and proclivities of the appellate judges who will hear your case. But before any of these factors can have an impact on the appeal you plan to bring, you must first satisfy the most elemental aspects of any appeal — you must get the appeal on file timely, and you must provide the court with an appropriate record for appellate review. Unless you can accomplish these two basic tasks your appeal will fail. This article will explain how to satisfy these most basic of appellate rules.

The rules governing filing appeals and designating the record are technical, and involve some deadlines that are jurisdictional. This article provides an overview, but before any lawyer tries to file and proceed with an appeal, he or she should carefully review the relevant sections of the California Rules of Court, and would do well to consult an appellate treatise (or an appellate lawyer.)  It’s not exactly a “don’t try this at home” situation; more like, “don’t try this without making sure you do it right.” The problem is not that it is particularly hard to comply with the rules; it is that if you fail to do so, for whatever reason, the result can be catastrophic for the case.

Rule 1: File the notice of appeal on time

Many of the deadlines built into the law have a certain amount of flexibility. If good cause exists, the failure to meet the deadline can often be excused under section 473 of the Code of Civil Procedure, or its equivalent provisions in the California Rules of Court. Rule 8.60(d) of the Rules of Court allows a reviewing court, for good cause, to relieve a party from default from any failure to comply with the rules — “except the failure to file a timely notice of appeal.” Likewise, 8.104(b) states that no court can extend the time to file a notice of appeal, and that “If a notice of appeal is filed late, the reviewing court must dismiss the appeal.” The only exception to this is when there is a declared public emergency, such as a fire or an earthquake. (CRC, Rule 8.66.)

The timely filing of a notice of appeal is a jurisdictional prerequisite. (Silverbrand v. County of Los Angeles (2009) 46 Cal.4th 106, 113.) Accordingly, “unless the notice is actually or constructively filed within the appropriate filing period, an appellate court is without jurisdiction to determine the merits of the appeal and must dismiss the appeal.” (Id.) Don’t get too excited about the concept of a “constructively filed” notice of appeal. That rule only applies in appeals by self-represented litigants in criminal custody, and holds that their appeals are deemed constructively filed when presented to the prison authorities within the normal deadline for filing an appeal. (See, e.g. Silverbrand, 46 Cal.4th at pp. 114 -120 [detailing history of prison-delivery rule and applying it to civil appeals as well as criminal cases].)

Filing the appeal timely does not sound so hard, and it often is not. But it can be tricky in some cases for two reasons: (1) it is not always clear what orders are appealable and what orders are not; and (2) the deadlines themselves are sometimes less than straightforward.

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Appellate lawyer, Jeffrey EhrlichCalifornia appeals lawyer, Jeffrey Isaac Ehrlich, is the principal of the Ehrlich Law Firm with Los Angeles County law offices in Encino and Claremont, California. He is certified as an appellate specialist by the California Bar’s Committee on Legal Specialization, and is the editor-in-chief of the Consumer Attorneys of Southern California’s Advocate magazine.

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10 Common mistakes that trial lawyers make that can lead to appellate disaster, and how to avoid them

Published Articles

10 Common mistakes that trial lawyers make that can lead to appellate disaster, and how to avoid them

By Jeffrey Isaac Ehrlich

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Mistakes Trial Lawyers MakeGetting a case from the pleading stage through trial can be like trying to walk through a minefield. There are always procedural traps lurking to snare the unwary trial lawyer. Here are 10 easy, and distressingly common mistakes for a trial lawyer to make, which can have disastrous consequences on appeal. Happily, they are easily avoided, if you know what to look for.

Mistake 1: Failing to appeal from an appealable order or to take a writ from an order subject to review by a statutory writ

“There can be but one final judgment in an action, and that is one which in effect ends the suit in the court in which it is entered, and finally determines the rights of the parties in relation to the matter in controversy” (San Joaquin County Dept. of Child Support Services v. Winn (2008) 163 Cal.App.4th 296, 300, 77 Cal.Rptr.3d 470, 472.) Under the “one final judgment” rule, an appeal will only lie from the final judgment; not from intermediate rulings. (Kinsmith Financial Corp. v. Gilroy (2003) 105 Cal.App.4th 447, 452, 129 Cal.Rptr.2d 478, 481; Maier Brewing Co. v. Pacific Nat. Fire Ins. Co. (1961) 194 Cal.App.2d 494, 497, 15 Cal.Rptr. 177, 179.)

The flip side of the one-final judgment rule is that if a judgment or order is appealable, aggrieved parties must file a timely appeal or forever lose the opportunity to obtain appellate court review. (Eisenberg, Horvitz & Weiner, California Practice Guide — Civil Appeals and Writs (Rutter 2009 rev.)(“Civil Appeals”) § 2:13, emphasis in text.) This is a jurisdictional principle: Appellate courts have no discretion to entertain appellate or writ review of appealable judgments or orders from which a timely appeal was not taken. (Id., citing Code Civ. Proc. § 906; Marriage of Weiss (1996) 42 Cal.App.4th 106, 119, 49 Cal. Rprt. 2d 339, 348.) A related rule is that when appellate review of a particular order is mandated by writ (a “statutory writ”) and the statute provides that this is the exclusive manner to obtain review, the failure to file a timely statutory writ will forfeit the right to later appellate review. (Civil Appeals, ¶ 15:96.1.)

The potential trap for trial lawyers then, is that a court issues a ruling or order that is deemed final or appealable, and the lawyer fails to appeal at the time, thinking instead that the matter will be addressed in the appeal from the final judgment.

There is no easy, all-purpose rule to apply to avoid this problem. Instead, trial lawyers can protect themselves by (a) being familiar with section 904.1 of the Code of Civil Procedure, which sets forth which orders are appealable; and (b) having a passing understanding of the workings of the one-final judgment rule, and its exceptions, which allow appeals from less-than-final judgments or orders.

For example, a “death knell” order that denies certification of a class action, or that disposes of an entire class action (such as an order sustaining a demurrer to class allegations) is deemed “final” and is immediately appealable. (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435, 97 Cal.Rptr.2d 179, 184 [denying class certification]; Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 699, 63 Cal.Rprt. 724, 728 [same]; Wilner v. Sunset Life Ins. Co. (2000) 78 Cal.App.4th 952, 957, 93 Cal.Rprt.2d 413, 416, fn. 1 [demurrer to class allegations].) The death-knell doctrine is therefore deemed part of the one-final judgment rule, not an exception to it.

In general, the law recognizes two general exceptions to the one final judgment rule: (1) a “collateral” final judgment or order, or (2) a judgment final as to a party. (“Civil Appeals” § 2.76.) The latter exception occurs frequently — when one party is simply dismissed from a case that goes on as the remaining parties. If you are the plaintiff and one of the defendants is dismissed, you must appeal at the time; not from the ultimate “final” judgment.

The definition of a “collateral order” is a bit more involved, and beyond the scope of this article. In general, it requires that three conditions be satisfied: (1) the order directs the performance of an act or the payment of money; (2) the order involve an issue that is wholly collateral to the main issue in the case; and (3) as to that collateral issue, the order is final. (Civil Appeals, § 2.77.)

Ultimately, every time an order is issued, the trial lawyer must consider whether it could be considered “final” and appealable, or within an exception to the one-final judgment rule, or subject to review by statutory writ. When in doubt, it may be worth asking an appellate lawyer.

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Appellate lawyer, Jeffrey EhrlichCalifornia appeals lawyer, Jeffrey Isaac Ehrlich, is the principal of the Ehrlich Law Firm with Los Angeles County law offices in Encino and Claremont, California. He is certified as an appellate specialist by the California Bar’s Committee on Legal Specialization, and is the editor-in-chief of the Consumer Attorneys of Southern California’s Advocate magazine.

Can HMOs be sued for “Bad Faith Insurance?” (Yes.)

HMO FAQs: What is an HMO? Can I sue my HMO for bad faith?

EEOB Insurance Bad Faith ClaimsWhat is an HMO? What is a Health Care Service Plan?

HMO is the acronym for “health maintenance organization.” In California, HMOs are called “health care service plans.”

What makes an HMO an HMO is that the policyholder (usually called a subscriber or member) pays the HMO a premium in exchange for a promise of health coverage provided by the HMO. Some HMOs provide the coverage directly; others enter into contracts with doctors and hospitals to provide the care. The HMO does not own the facilities or employ the staff. Often, the medical group will not employ the doctors who belong to it either. Rather, the HMO will pay the hospitals and the groups a fixed amount each month based on the number of members enrolled in the plan.The hospital or group then agrees to provide care in exchange for this monthly payment.

In most cases, the providers decide what is covered and what is not covered, without any input from the HMO. (Although in most cases, the member can appeal the decision to the HMO.) The HMO is, in essence, nothing more than a middleman.

Can I sue my HMO / Health Care Service Plan for bad faith and punitive damages?

Yes. We are proud that two of our cases, Smith v. Pacificare and Kotler v. Pacificare, confirmed that regardless of the differences between HMOs and insurers, HMOs are “in the business of insurance,” and can be sued for bad faith. When an insurance company can be sued for bad faith, you may be able to sue for punitive damages in addition to economic damages.

Kotler v. Pacificare of California (2005) 105 Cal.App.4th 573, 129 Cal.Rptr.2d 526
View Summary | Download .pdf

Smith v. Pacificare Behavioral Health of California (2002) 93 Cal.App.4th 139, 113 Cal.Rptr.2d 140.
View Summary | Download .pdf


More HMO FAQs


How we help consumers and insurance policyholders

While much of our practice involves work we do for other lawyers, we also handle cases for people and businesses involved in disputes with their insurance companies. If you, your business, or a member of your family is involved in an insurance-related dispute, we might be able to help.

Our analysis of insurance issues is so well respected that we are sometimes consulted by insurance companies themselves. We were recently asked by a major insurer to advise it on whether to make a $17 million claim to its own insurance company.

We do not handle litigation on a high-volume, assembly-line basis, and we are therefore very selective about the cases we take. But when we do take a case, we devote considerable thought, care, and attention to it, so that it moves as quickly through the courts as the judicial system permits.

To find out more about what we can do for you read “Our Litigation Practice for Policyholders.”


For Consumers and Policyholders


Southern California civil appeals attorney, Jeffrey Isaac Ehrlich, is an appellate specialist certified by the State Bar of California’s Committee on Legal Specialization.

Common reasons that plans deny care and what you can do about it

Common reasons that plans deny care and what you can do about it

By Jeffrey I. Ehrlich, Certified Appellate Specialist
Civil Appeals Attorney

Medical Insurance Claim Denied LawyerFour reasons most insurance plans deny care

Most plans — whether HMOs or insured plans, deny care for one of four reasons:

  • The patient went “out of plan” to receive care, instead of following the plan’s rules and seeing a provider who has a contract with the plan;
  • The services requested were determined not to be “medically necessary;”
  • The services requested were determined to be “experimental or investigational;”
  • The services were simply not covered by the plan — for example, almost all plans exclude coverage for cosmetic procedures, and so would not cover a face lift or breast-augmentation surgery.

Some options when a health plan denies care

Follow the rules

Make sure that you are following the plan’s rules for obtaining referrals to specialists. It is very difficult to make a plan pay for care when a patient “self refers” outside of the plan. (It is possible, however, when the plan imposes unreasonable delays on its members to receive specialty care. A case handled by Mr. Ehrlich, Kotler v. Pacificare (2005) 126 Cal.App.4th 950, held that a plan could be held to have breached its obligations to the insured by failing to provide timely specialist care.)

Get help from your doctor to prove medical necessity

All plans have a process for appealing the denial of care. Invoke that procedure. This can sometimes be done by phone, but make sure you do it in writing. If the denial was based on a lack of medical necessity, you must have the doctor who made the request that was denied write a clear, comprehensive letter explaining why the plan’s denial was wrong. Ideally, the letter should refer to the plan’s definition of “medical necessity” and explain why the requested care fit within that definition. Doctors are busy, and frequently tend to write short, conclusory letters that do not provide sufficient facts. Make sure that the doctor provides sufficient detail.

Be aware that off-label use of FDA-approved drugs is often covered under California law

Plans often will deny coverage for so-called off-label use of FDA-approved drugs — that is, the use of an FDA-approved drug for a treatment or purpose that it has not been directly approved for by the FDA. Plans will often issue these denials even though California law requires them to cover off-label use of FDA-approved drugs if the treatment meets certain conditions, which are often easily satisfied. (Ins. Code section 10123.195; Health & Safety Code section 1367.21, subd. (a).)

Make sure to request independent medical review of a denial based on “experimental or investigational” treatment if the patient has a terminal illness

Insurance Code section 10145.3, and Health & Safety Code section 1370.4, the Friedman-Knowles Act, requires health plans (both insured plans and health-care service plans) to pay for experimental treatment that would otherwise be excluded by the plan, where an independent medical review shows that the experimental treatment would be more beneficial than conventional treatment.

Again, plans frequently ignore this law, and simply deny care as experimental or investigational without even advising the policyholder of their rights under the Friedman-Knowles Act to request independent medical review.


How we help consumers and insurance policyholders

While much of our practice involves work we do for other lawyers, we also handle cases for people and businesses involved in disputes with their insurance companies. If you, your business, or a member of your family is involved in an insurance-related dispute, we might be able to help.

Our analysis of insurance issues is so well respected that we are sometimes consulted by insurance companies themselves. We were recently asked by a major insurer to advise it on whether to make a $17 million claim to its own insurance company.

We do not handle litigation on a high-volume, assembly-line basis, and we are therefore very selective about the cases we take. But when we do take a case, we devote considerable thought, care, and attention to it, so that it moves as quickly through the courts as the judicial system permits.

To find out more about what we can do for you read “Our Litigation Practice for Policyholders.”


For Consumers and Policyholders


Southern California civil appeals attorney, Jeffrey Isaac Ehrlich, is an appellate specialist certified by the State Bar of California’s Committee on Legal Specialization.

What is the difference between “health insurance,” a “health-care service plan,” and a “health-maintenance organization (“HMO”)?

Los Angeles Medical Insurance Claims Appeals Lawyer

Types of health care plans

Types of Health Care Insurance Plan CoverageHealth-care coverage generally comes in three major forms:

  • Insurance plans, that are subject to the provisions of the Insurance Code and are supervised by the California Department of Insurance;
  • Health-care service plans, that are subject to the provisions of the Health & Safety Code, and are supervised by the Department of Managed Health Care; and
  • Self-funded plans, which are usually set up by an employer who pays the plan benefits. These plans are usually administered by a company called “third-party administrator.” Frequently, health-insurance companies will make contracts with self-funded plans to serve as the plan administrator. Self-funded plans are not subject to state regulation as a result of ERISA.

What is the difference between “health insurance,” a “health-care service plan,” and a “health-maintenance organization (“HMO”)?

A health-care service plan is the same as an HMO. The California Health & Safety Code calls these plans “health care service plans,” while the Federal Health Maintenance Organization Act calls them HMOs. Sometimes, it makes more sense to call all these plans “health plans.”

It used to be easy to distinguish between the various kinds of plans. An “insurance” plan paid your medical bills after you incurred them. Technically, it “indemnified” you (paid you back) for the medical costs you incurred if you received health care. These plans were referred to as “indemnity plans.” Under indemnity plans, you chose your medical providers, you incurred the liability for paying them, and the plans reimbursed you. In some cases, the step of the patient paying for the treatment first and being reimbursed was skipped, and the medical provider would bill the insurer directly, and the insurer would pay the bill.

HMOs, by contrast, involved a contract in which plan enrollees agreed to receive all their care from health-care providers who were employed by the plan. They paid the plans in advance each month to be enrolled, and the plans provided all care for this price — there were no bills and nothing to reimburse. The most familiar example was the standard Kaiser plan. Members joined Kaiser, saw Kaiser doctors, and received their treatment in Kaiser hospitals.

The distinction between these kinds of plans has become blurred, however. First, many HMOs stopped actually hiring their own doctors and running their own hospitals. Rather, they would form “networks” of doctors, hospitals and other providers, by entering into contracts. The plans would pay the doctors and hospitals a fixed amount each month for each patient enrolled, and the doctor and hospital would agree to provide care for this amount. This is called a “capitated” system, because compensation to the providers is made “per capita” or “per head” enrolled in the plan.

But insurance plans also started to make establish networks of providers. They would negotiate contracts in which the providers would agree to provide care to the insurance company’s policyholders for lower rates than for patients who did not belong to a plan that had a contract with the provider. These providers were often called “preferred providers” and the plans would lower the co-payment for insureds who received care from preferred providers. Plans that offered this options were often called PPO plans (for “Preferred Provider Organizations”.)

Today, there are all manner of plans, with puzzling acronyms. Some companies, like Blue Shield, offer some plans that insured plans, and others that are health-care service plans. It can be almost impossible to tell which is which.

Which are better — HMOs or insured plans?

One key difference between HMOs and traditional insurance is the direction in which the incentive structure points. In the simplest terms, insurance tends to create incentives for providers to provide treatment, because payments are based on the service rendered to the patient — the more services rendered, the higher the bill and the higher the payment. The downside of this incentive structure is that patients may be overtreated, which causes costs to rise and which can harm the patient.

By contrast, the incentive structure for HMOs creates incentives to withhold care. The medical group or doctor working with an HMO is paid a fixed amount each month, whether or not care is provided. Therefore the most profitable situation for the HMO is when no care is provided. When a member requires care, the group must use some of the money it has already been paid to provide that care. In many cases, the HMO structure forces the doctor to decide what care to provide to the patient when the doctor or the doctor’s group will have to pay for the care.

Another difficulty that HMO members may experience is that the providers with whom the HMO has entered into contracts may not be the most qualified providers. But part of the HMO “bargain” is that, with some exceptions, the HMO member must receive care from the providers that the HMO has contracted with. This lack of choice can mean that the patient is asked to accept whatever level of care is provided by the HMO, even if far better care is available out of network from doctors or facilities who specialize in treating the member’s condition, or who use new techniques or equipment that produce demonstrably better outcomes.

But it should not be overlooked that because HMOs make money when they do not have to provide care, they have a direct financial incentive to keep their members healthy. Healthy members = less care = more profits. In theory, this incentive means that HMOs are more likely to encourage members to receive preventative care, such as immunizations, physicals, and disease screenings. Also, because members in HMOs are usually assigned to a particular primary-care doctor who is responsible for coordinating their care, members may benefit from having a single doctor who is familiar with their health history and needs.

Common reasons that plans deny care and some options when a health plan denies care


Los Angeles HMO Insurance Appeals Attorney

While much of our practice involves work we do for other lawyers, we also handle cases for people and businesses involved in disputes with their insurance companies. If you, your business, or a member of your family is involved in an insurance-related dispute, we might be able to help.

Our analysis of insurance issues is so well respected that we are sometimes consulted by insurance companies themselves. We were recently asked by a major insurer to advise it on whether to make a $17 million claim to its own insurance company.

We do not handle litigation on a high-volume, assembly-line basis, and we are therefore very selective about the cases we take. But when we do take a case, we devote considerable thought, care, and attention to it, so that it moves as quickly through the courts as the judicial system permits.

To find out more about what we can do for you read “Our Litigation Practice for Policyholders.”


For Consumers and Policyholders


Southern California civil appeals attorney, Jeffrey Isaac Ehrlich, is an appellate specialist certified by the State Bar of California’s Committee on Legal Specialization.

HMO FAQs: Can I sue my HMO for bad faith?

HMO FAQs: What is an HMO? Can I sue my HMO for bad faith?

HMO Insurance Bad Faith Claims

Can HMOs be sued for “Bad Faith Insurance?” Yes. We are proud that two of our cases, Smith v. Pacificare and Kotler v. Pacificare, confirmed that regardless of the differences between HMOs and insurers, HMOs are “in the business of insurance,” and can be sued for bad faith.

What is an HMO? What is a Health Care Service Plan?

HMO is the acronym for “health maintenance organization.” In California, HMOs are called “health care service plans.”

What makes an HMO an HMO is that the policyholder (usually called a subscriber or member) pays the HMO a premium in exchange for a promise of health coverage provided by the HMO. Some HMOs provide the coverage directly; others enter into contracts with doctors and hospitals to provide the care. The HMO does not own the facilities or employ the staff. Often, the medical group will not employ the doctors who belong to it either. Rather, the HMO will pay the hospitals and the groups a fixed amount each month based on the number of members enrolled in the plan.The hospital or group then agrees to provide care in exchange for this monthly payment.

In most cases, the providers decide what is covered and what is not covered, without any input from the HMO. (Although in most cases, the member can appeal the decision to the HMO.) The HMO is, in essence, nothing more than a middleman.

Can I sue my HMO / Health Care Service Plan for bad faith and punitive damages?

Yes. We are proud that two of our cases, Smith v. Pacificare and Kotler v. Pacificare, confirmed that regardless of the differences between HMOs and insurers, HMOs are “in the business of insurance,” and can be sued for bad faith. When an insurance company can be sued for bad faith, you may be able to sue for punitive damages in addition to economic damages.

Kotler v. Pacificare of California (2005) 105 Cal.App.4th 573, 129 Cal.Rptr.2d 526
View Summary | Download .pdf

Smith v. Pacificare Behavioral Health of California (2002) 93 Cal.App.4th 139, 113 Cal.Rptr.2d 140.
View Summary | Download .pdf


More HMO FAQs


How we help consumers and insurance policyholders

While much of our practice involves work we do for other lawyers, we also handle cases for people and businesses involved in disputes with their insurance companies. If you, your business, or a member of your family is involved in an insurance-related dispute, we might be able to help.

Our analysis of insurance issues is so well respected that we are sometimes consulted by insurance companies themselves. We were recently asked by a major insurer to advise it on whether to make a $17 million claim to its own insurance company.

We do not handle litigation on a high-volume, assembly-line basis, and we are therefore very selective about the cases we take. But when we do take a case, we devote considerable thought, care, and attention to it, so that it moves as quickly through the courts as the judicial system permits.

To find out more about what we can do for you read “Our Litigation Practice for Policyholders.”


For Consumers and Policyholders


Southern California civil appeals attorney, Jeffrey Isaac Ehrlich, is an appellate specialist certified by the State Bar of California’s Committee on Legal Specialization.

HMO FAQS: MHO vs PPO – How HMOs Operate and Make Money

HMO FAQS: HMO vs PPO – How HMOs Operate and Make Money

Appellate attorney Jeffrey Ehrlich can help with bad faith insurance claims appeals against HMOs.

Industry standards require that requests for referrals be acted on within certain time limits, depending on the urgency of the need for care. But HMOs and medical groups often do not meet the deadlines.

How do HMOs compare to PPO and “traditional” health insurance?

The key difference between an HMO and an insurer is that HMOs provide the promised coverage to the member (either directly or indirectly) while traditional insurance simply pays for care that the policyholder has obtained, after the care was rendered.

In today’s world, the differences between HMOs and regular insurance can be blurry, because insurers may have restrictive practices or policy terms, or may offer financial incentives to use providers who have agreed in advance to provide care for a discounted fee.

Traditional insurance usually allowed a policyholder to obtain treatment from any medical provider. The insurer would then agree to pay a certain amount, and if that was not enough to cover the provider’s fee, the policyholder would be responsible for paying the balance. In order to cut costs, insurers began to enter into contracts with providers in advance, in which the providers agreed to accept a discounted fee in exchange for being listed in the plan’s provider network. Some plans encourage their policyholders to seek care from these “preferred providers” by paying less for care given by non-preferred providers. Some plans simply provide that there is no coverage for care outside of the plan’s network. This type of plan in some ways resembles an HMO.

HMOs ( health care service plans) usually require a referral to see a specialist

Another difference between HMOs and insurance is that with HMOs a member cannot usually “self refer” to a specialist. So, if a member wakes up one morning unable to bend her elbow, she cannot make an appointment directly with an orthopedic surgeon. Rather, she must first be seen by her primary-care physician or “PCP.” If the PCP determines that the member should be seen by a specialist, the PCP will give her a “referral.” Without the referral, the plan will not pay for treatment by a specialist. Some plans require a new referral from the PCP every time care by a specialist is sought.

PCP’s are sometimes able to write the referral on the spot; but in other cases, they have to request permission from the medical group for the referral. This means that the member will have to wait until the group considers the referral before scheduling an appointment with a specialist.

Industry standards require that requests for referrals be acted on within certain time limits, depending on the urgency of the need for care. But HMOs and medical groups often do not meet the deadlines.


More HMO FAQs

How we help consumers and insurance policyholders

While much of our practice involves work we do for other lawyers, we also handle cases for people and businesses involved in disputes with their insurance companies. If you, your business, or a member of your family is involved in an insurance-related dispute, we might be able to help.

Our analysis of insurance issues is so well respected that we are sometimes consulted by insurance companies themselves. We were recently asked by a major insurer to advise it on whether to make a $17 million claim to its own insurance company.

We do not handle litigation on a high-volume, assembly-line basis, and we are therefore very selective about the cases we take. But when we do take a case, we devote considerable thought, care, and attention to it, so that it moves as quickly through the courts as the judicial system permits.

To find out more about what we can do for you read “Our Litigation Practice for Policyholders.”


For Consumers and Policyholders


Southern California civil appeals attorney, Jeffrey Isaac Ehrlich, is an appellate specialist certified by the State Bar of California’s Committee on Legal Specialization.

How to Read an Insurance Policy

How to Read an Insurance Policy

Insurance policies must be drafted in clear language

The law requires that insurance policies be drafted in clear language. But anyone who has tried to read an insurance policy knows that they are seldom clear and that they are almost always difficult to read and understand.

Determining what the policy covers and does not cover can be made a little bit easier by knowing how insurance policies are typically structured. Almost all policies are structured in the following way:

How to Read an Insurance Policy - The law requires that the legal language in your insurance policy be clear.

Insurance policy declarations

The “declarations” page is usually the first page of the policy. It is often typed instead of being on a pre-printed form. It will show who the “named insured” of the policy is, and will list the type of coverages that are provided in the policy (such as “dwelling” or “property damage” or “liability.”) The declarations also list coverage limits for each type of coverage (in other words, the amount of coverage that has been purchased), and will list the endorsements that are part of the policy.

Definitions

The “definitions” explain how the insurance company has used certain words or terms in the policy. For example, the policy is likely to refer to the insurance company as “us.” The term “us” will be a defined term in the policy. Similarly, the policy will refer to “you” and that term will be defined to mean “the named insured referred to in the declarations.”

Coverages

The “coverages” contain the promises that the insurance company has made. They explain what the policy provides coverage for.

Exclusions

“Exclusions” are provisions that take away coverage that would otherwise be provided by the policy. For example, a health-insurance policy might promise to pay for all medically-necessary treatment required by the policyholder, but this broad promise will be qualified by an exclusion for treatment that is deemed “experimental.”

Conditions

The “conditions” explain what the policyholder must do in order to qualify for coverage in the event of a loss, and explain how losses will be paid. For example, in a homeowner’s policy, a typical condition of coverage is that the loss be reported to the insurer within a year after it occurs. Some conditions in the policy will be strictly enforced. Others, by contrast, will be subject to statutes or legal rules that effectively make them unenforceable.

Endorsements

“Endorsements” are special provisions added to the policy to change its terms. They are most commonly used to modify the terms of a policy after it has been issued. Rather than issue an entirely new policy, the insurer will simply issue an endorsement that refers to the part of the policy it is changing, and which will replace that provision.
Sometimes, insurance companies will issue a basic policy, but will allow the policyholder to purchase additional types of coverage by paying an increased premium.

These special coverages will often be added by endorsement. For example, a homeowner’s policy will typically exclude all coverage for earth movement, and hence does not cover losses caused by an earthquake. But for an extra premium, the carrier may add earthquake coverage, and this coverage will be provided by an endorsement.

Making sense of it all (or not)

It can sometimes be difficult to differentiate between the parts of a policy. Insurers may limit coverage by defining policy terms in a special way. Or they may include language in one section of the policy that would seem to belong in a different section. For example, they may limit the scope of a coverage with exclusionary language contained within the insuring clause, instead of in a separate exclusion. Or they may limit the scope of an exclusion by inserting language that creates an exception to its operation. (This is called an exception to an exclusion.)

As a result, it is often difficult for anyone other than an expert to be able to read an insurance policy and know what it covers, and sometimes even the experts will disagree.


California insurance appeals attorney, Jeffrey Isaac Ehrlich, is an appellate specialist certified by the State Bar of California’s Committee on Legal Specialization. He is a principal of the Ehrlich Law Firm, and handles legal appeals throughout California.

HMO FAQs: Are HMOs really all bad? Why are there so many HMO horror stories?

FAQS: Are HMOs Good or Bad?

Are HMOs good at providing quality patient care?HMOs make more money by not providing care to patients.

The medical group or doctor working with an HMO is paid a fixed amount each month, whether or not care is provided. Therefore the most profitable situation for the HMO is when no care is provided to its members.

Are HMOs good or bad for their members?

It depends. HMOs were designed to hold down the cost of health care, and so they tend to charge lower premiums than traditional insurers. Some HMOs can provide excellent care. But there are also many examples where HMOs have not provided the care that their members required.

Key difference between HMOs, PPO plans and traditional health insurance

One key difference between HMOs and traditional insurance is the direction in which the incentive structure points. In the simplest terms, insurance tends to create incentives for providers to provide treatment, because payments are based on the service rendered to the patient — the more services rendered, the higher the bill and the higher the payment. The downside of this incentive structure is that patients may be overtreated, which causes costs to rise and which can harm the patient.

By contrast, the incentive structure for HMOs creates incentives to withhold care. The medical group or doctor working with an HMO is paid a fixed amount each month, whether or not care is provided. Therefore the most profitable situation for the HMO is when no care is provided. When a member requires care, the group must use some of the money it has already been paid to provide that care. In many cases, the HMO structure forces the doctor to decide what care to provide to the patient when the doctor or the doctor’s group will have to pay for the care.

Another difficulty that HMO members may experience is that the providers with whom the HMO has entered into contracts may not be the most qualified providers. But part of the HMO “bargain” is that, with some exceptions, the HMO member must receive care from the providers that the HMO has contracted with. This lack of choice can mean that the patient is asked to accept whatever level of care is provided by the HMO, even if far better care is available out of network from doctors or facilities who specialize in treating the member’s condition, or who use new techniques or equipment that produce demonstrably better outcomes.


More HMO FAQs


How we help consumers and insurance policyholders

While much of our practice involves work we do for other lawyers, we also handle cases for people and businesses involved in disputes with their insurance companies. If you, your business, or a member of your family is involved in an insurance-related dispute, we might be able to help.

Our analysis of insurance issues is so well respected that we are sometimes consulted by insurance companies themselves. We were recently asked by a major insurer to advise it on whether to make a $17 million claim to its own insurance company.

We do not handle litigation on a high-volume, assembly-line basis, and we are therefore very selective about the cases we take. But when we do take a case, we devote considerable thought, care, and attention to it, so that it moves as quickly through the courts as the judicial system permits.

To find out more about what we can do for you read “Our Litigation Practice for Policyholders.”


For Consumers and Policyholders


Southern California civil appeals attorney, Jeffrey Isaac Ehrlich, is an appellate specialist certified by the State Bar of California’s Committee on Legal Specialization.

Why do HMOs have such a bad reputation?

HMO FAQs: Are HMOs bad? Why are there so many HMO horror stories?

Why HMOs Have a Bad Reputation

A common example of bad faith HMO insurance occurs in situations where a patient is not given diagnostic tests because the “odds” are that their problem is not serious.

HMO is the acronym for “health maintenance organization.” In California, HMOs are called “health care service plans.” HMOs make more money by not providing care to patients.

Why do HMOs have such a bad reputation?

In the pursuit of profit, HMOs have negotiated ever-declining rates with their providers. As a result, many medical groups and hospitals have gone bankrupt in the last few years. Doctors are ultimately human, and may succumb to the economic incentive that the HMO structure provides to withhold care.

The kind of HMO horror stories that make the newspapers occur when the economic incentives that HMOs create to withhold care end up harming patients. For example, it was recently reported that Kaiser Permanente was facing criticism for refusing to pay for organ transplants performed at non-Kaiser facilities. Instead, it required its members to obtain their transplants at a new Kaiser hospital, where the waiting list for organs was the longest in the country.

An Example of HMO bad faith

Another common example of HMO bad faith occurs in situations where a patient is not given diagnostic tests because the “odds” are that their problem is not serious.

We are currently working on a case where an HMO member sought care from her PCP for recurring headaches. The PCP believed that the headaches were caused by anxiety, so he prescribed anti-anxiety medications and eventually referred the patient to a psychiatrist.

Even after the symptoms persisted for months, the PCP refused to authorize an MRI. Finally, the patient was referred to a neurologist, who authorized the MRI, which showed that the patient had a golf-ball sized tumor behind her left eye. Had the PCP been less resistant to ordering the expensive MRI, the tumor would have been diagnosed long before it had grown so large.

This pattern is something we have seen time and again with HMOs.

Can HMOs / Health Care Service Plans be sued for bad faith damages?

Yes. We are proud that two of our cases, Smith v. Pacificare and Kotler v. Pacificare, confirmed that regardless of the differences between HMOs and insurers, HMOs are “in the business of insurance,” and can be sued for bad faith damages.

Kotler v. Pacificare of California (2005) 105 Cal.App.4th 573, 129 Cal.Rptr.2d 526
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Smith v. Pacificare Behavioral Health of California (2002) 93 Cal.App.4th 139, 113 Cal.Rptr.2d 140.
View Summary | Download .pdf


More HMO FAQs


How we help consumers and insurance policyholders

While much of our practice involves work we do for other lawyers, we also handle cases for people and businesses involved in disputes with their insurance companies. If you, your business, or a member of your family is involved in an insurance-related dispute, we might be able to help.

Our analysis of insurance issues is so well respected that we are sometimes consulted by insurance companies themselves. We were recently asked by a major insurer to advise it on whether to make a $17 million claim to its own insurance company.

We do not handle litigation on a high-volume, assembly-line basis, and we are therefore very selective about the cases we take. But when we do take a case, we devote considerable thought, care, and attention to it, so that it moves as quickly through the courts as the judicial system permits.

To find out more about what we can do for you read “Our Litigation Practice for Policyholders.”


For Consumers and Policyholders


Southern California civil appeals attorney, Jeffrey Isaac Ehrlich, is an appellate specialist certified by the State Bar of California’s Committee on Legal Specialization.

FAQS: HMO Doctors and Specialists

FAQS: HMO Doctors and Specialists

Can you sue your HMO? Appellate specialist Jeffrey Ehrlich offers free consultations to help you understand if you can sue your HMO.

HMOs are obligated by law to make medically necessary care available to their members
within a reasonable time. This means, an HMO must allow you to see another doctor (usually within the plan) if your assigned HMO doctor is not able to see you in a reasonable time frame.

Do I have to see the HMO’s doctor?

It depends. HMOs are obligated by law to make medically necessary care available to their members within a reasonable time. So, if the HMO has a qualified doctor in the network, but the doctor is so busy that the member cannot obtain an appointment within a reasonable time, the HMO must provide another doctor, or pay for the member to be seen “out of plan.”

In California, HMOs are also called “health care service plans.”

What if my HMO does not have the right doctor or specialist?

Similarly, because of the highly-specialized nature of medical practice today, the HMO may not have the right specialist available within the network. If not, then the member must be referred outside the network to obtain necessary care.

More HMO FAQs


Los Angeles Insurance Appeals Attorneys

While much of our practice involves work we do for other lawyers, we also handle cases for people and businesses involved in disputes with their insurance companies. If you, your business, or a member of your family is involved in an insurance-related dispute, we might be able to help.

Our analysis of insurance issues is so well respected that we are sometimes consulted by insurance companies themselves. We were recently asked by a major insurer to advise it on whether to make a $17 million claim to its own insurance company.

We do not handle litigation on a high-volume, assembly-line basis, and we are therefore very selective about the cases we take. But when we do take a case, we devote considerable thought, care, and attention to it, so that it moves as quickly through the courts as the judicial system permits.

To find out more about what we can do for you read “Our Litigation Practice for Policyholders.”


For Consumers and Policyholders


Southern California civil appeals attorney, Jeffrey Isaac Ehrlich, is an appellate specialist certified by the State Bar of California’s Committee on Legal Specialization.

What is ERISA? Can I sue my HMO for punitive damages?

There is no right to a jury trial in ERISA cases, and in many cases, there is no right to call witnesses at all.

There is no right to a jury trial in ERISA cases, and in many cases, there is no right to call witnesses at all.

UNUM Life Ins. Co. of America v. Ward, 526 U.S. 358 (1999), Mr. Ehrlich briefed and argued in the U.S. Supreme Court.

The issue raised by this case was whether the federal statute governing employee benefit plans, ERISA, overrode state insurance statutes and rules, which provided considerable protection to policyholders.

In a unanimous decision the Supreme Court adopted the position advocated by Mr. Ehrlich, and limited ERISA’s preemptive scope. The Ward decision benefited more than 80 million people who obtained their health insurance, life insurance, or disability insurance through their employer.

View Summary | Download .pdf

What is ERISA? Can I sue my HMO for punitive damages?

By Jeffrey I. Ehrlich, Attorney
California Certified Appellate Specialist

No federal law prevents HMOs from being sued

Many newspaper articles refer to a “federal law that prevents lawsuits against HMOs.” This is not accurate, because there is no federal law that specifically protects HMOs from lawsuits.

These articles are referring to a federal law called the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 101, et seq., which is commonly referred to as “ERISA.”

What is ERISA law?

ERISA preempts (that is, overrides) many state laws that regulate employee benefit plans. Simply put, if you obtain your health insurance, life insurance, or disability insurance through a plan set up by your employer, ERISA probably applies. If it does, your rights are dramatically limited.

As a practical matter, this means that when ERISA applies, there is no economic incentive for the plan to provide the benefits that have been promised. If the plan refuses, and the member sues, the worst thing that happens to the plan is that a court may order it to do what it was supposed to do in the first place. In other words, it pays what it owes. There is no additional penalty. This is like limiting the penalty for bank robbery to making the bank robber give back the money.

The absence of any right to compensatory damages can lead to tragic cases. In one, the plan refused to allow a member to undergo necessary treatment for cancer, even though it was covered. The member went through the plan’s various appeal processes, and the plan eventually relented and agreed to authorize treatment. But by then, it was too late, and the window of opportunity for the treatment to be effective had passed. The plan member died shortly after that.

When her family sued the plan, the court dismissed the case under ERISA, finding that there was no remedy available. Because the member was dead, there was no way to award her the plan benefits she was originally entitled to (the medical treatment) – which is the only remedy allowed. There is no remedy for emotional distress, or wrongful death. In effect, ERISA allows plans to kill their members with impunity.

Injunctions against ERISA-covered plans

If an ERISA-covered plan is refusing to authorize treatment, a court can issue an injunction ordering the plan to provide covered care. It is therefore imperative in this situation for the plan member to seek legal help immediately, so that injunctive relief can be obtained while treatment is still likely to be effective.


More HMO FAQs


For Consumers and Policyholders


Southern California civil appeals attorney, Jeffrey Isaac Ehrlich, is an appellate specialist certified by the State Bar of California’s Committee on Legal Specialization.

How ERISA Law affects the insured’s rights

How ERISA Law affects the insured’s rights

by Jeffrey I. Ehrlich, California Certified Appellate Specialist
Civil Appeals Attorney

ERISA law and health insurance plansEmployee Retirement Security Act of 1974 (ERISA)

If the insurance at issue in a potential case was obtained through an employer, the claims of the insured person or their beneficiary against the insurance company are likely subject to a federal law called the Employee Retirement Security Act of 1974, more commonly known by the acronym of “ERISA.” ERISA is located at Title 29 of the U.S. Code, beginning at section 1001. ERISA does not apply to employees of state and local governments,or employees of religious organizations.

Congress originally enacted ERISA to protect workers’s pension benefits, and to standardize the administration of “employee benefits plans.” Employer-sponsored life, health and disability insurance plans are considered “employee benefit plans” under ERISA. Unfortunately, certain aspects of ERISA have been seized on by insurers and the courts to severely limit the rights of people whose insurance is affected by ERISA.

ERISA preemption

ERISA operates to preempt or supersede state laws that “relate to” employee benefit plans. It also provides the exclusive remedy for claims against insurance companies to recover on policies that are covered by ERISA. These two aspects of ERISA, taken together, severely limit the options of an insured person to force an insurer to pay a claim, or to recover damages from the insurer if it unreasonably refuses to pay insurance benefits.

For example, under California law, if an insurance company unreasonably refuses to pay policy benefits the policyholder can sue it for “bad faith.” If the policyholder wins the lawsuit, the insurance company has to pay the amount of benefits owed and interest on the amounts wrongfully withheld. In addition, the insurance company can be held liable for the policyholder’s attorney’s fees in bringing the suit to recover the benefits; plus, it can be held liable for damages to the policyholder that go beyond the amount of unpaid policy benefits. These can include damages for emotional distress caused by the failure to pay benefits, and punitive damages, which are assessed to punish bad conduct and deter others from engaging in similar misconduct.

ERISA replaces this body of California law with much more restrictive federal law. Under ERISA, if an insurer unreasonably withholds policy benefits, the most that the policyholder can recover would be benefits owed. The court is allowed to award, but is not required to award, attorney’s fees and interest. Damages for emotional distress, punitive damages, and damages for any other losses caused by the insurer are unavailable.

How ERISA unfairly restricts policyholder rights

Injunctions against ERISA-covered plans

Landmark California Appeals

If an ERISA-covered plan is refusing to authorize treatment, a court can issue an injunction ordering the plan to provide covered care. It is therefore imperative in this situation for the plan member to seek legal help immediately, so that injunctive relief can be obtained while treatment is still likely to be effective. Read more about ERISA and HMOs.

A case called Bast v. Prudential Ins. Co, 150 F.3d 1003 (9th Cir. 1998), provide a clear and tragic, but by no means unusual, example of how ERISA unfairly restricts policyholder rights. In Bast the insurer unreasonably failed to authorize a bone marrow transplant for Mrs. Bast, even though it was a covered plan benefit. By the time the insurer reversed its decision and agreed to pay it was too late, and Mrs. Bast died soon after. Her family sued the insurer, and the court held that the only remedy ERISA permitted was payment of the policy benefit that had been withheld — the cost of the bone marrow transplant. Because Mrs. Bast had died and no transplant would be performed even this remedy was not available. Ultimately, the court held that ERISA provided surviving family members with no remedy whatsoever for the plan’s refusal to provide covered benefits, even if that refusal resulted in the policyholder’s death.

Because insurance companies know that their liability for claims subject to ERISA is limited to what they would owe if they paid the claim voluntarily, insurers have little incentive to pay claims. Instead, ERISA creates a strong incentive for insurers to refuse to pay and to force the policyholder to sue. Insurers know that if they lose the lawsuit, they end up paying only what they owe anyway, and perhaps attorney’s fees.

Unfortunately, when the policyholder does sue, ERISA operates to make it more difficult for the policyholder to win. Depending on how the employer’s benefit plan is worded, the court reviewing the policyholder’s claim may not make an independent review to determine if the plan reached the correct decision about whether to pay the claim. Instead, it will only ask whether the decision was “arbitrary” or entirely indefensible. As long as the court can identify some plausible factual or legal basis to uphold the denial, it will do so, even if it believes the denial was wrong.

Even if the plan is worded in a way that allows the court to review whether or not the decision by the insurer was correct, the court is unlikely to have a trial or to hear the testimony of witnesses. Instead, in almost all ERISA cases, the court simply reviews the administrative record that was before the insurance company, and makes its decision based entirely on what information is in that record.

In some cases it is possible to convince the court to hear additional evidence, but this the rare exception, rather than the rule. In practical terms, this means the policyholder will never get to tell his or her story to the judge. Nor will the judge have an opportunity to hear the people who made the decision for the insurance company testify.

HMO FAQs

Los Angeles ERISA Appeals Attorney

Because ERISA creates these difficult obstacles to recovery, and because ERISA is very complex, few law firms will take on cases subject to ERISA. At the Ehrlich Law Firm, we have litigated ERISA cases at every level — in the U.S. District Court, in the Court of Appeals, and even in the U.S. Supreme Court.  Learn more about how we can help you, and Jeffrey I. Ehrlich’s significant appellate victories.

Landmark California AppealsLandmark ERISA Decision

There is no right to a jury trial in ERISA cases, and in many cases, there is no right to call witnesses at all.

Mr. Ehrlich briefed and argued UNUM Life Ins. Co. of America v. Ward, 526 U.S. 358 (1999) in the U.S. Supreme Court.

The issue raised by this case was whether the federal statute governing employee benefit plans, ERISA, overrode state insurance statutes and rules, which provided considerable protection to policyholders. In a unanimous decision the Supreme Court adopted the position advocated by Mr. Ehrlich, and limited ERISA’s preemptive scope. The Ward decision benefited more than 80 million people who obtained their health insurance, life insurance, or disability insurance through their employer.

View Summary | Download .pdf | Significance of Mr. Ehrlich’s landmark appellate cases


Southern California civil appeals attorney, Jeffrey Isaac Ehrlich, is an appellate specialist certified by the State Bar of California’s Committee on Legal Specialization. He is the principal of the Ehrlich Law Firm, with Los Angeles County law offices in Encino and Claremont, California.

The genuine-dispute doctrine after Wilson v. 21st Century Ins. Co.

Published Articles

The genuine-dispute doctrine after Wilson v. 21st Century Ins. Co.

Advocate. August 2008 Issue | Download .pdf
By Jeffrey Isaac Ehrlich, Editor-in-Chief

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Appellate lawyer, Jeffrey EhrlichIn early 2007, I wrote an article for the Consumer Attorneys of California’s Forum magazine, in which I compared the growth of the so-called genuine-dispute or genuine-issue doctrine to barnacles attaching themselves to the hull of a ship. I borrowed this metaphor from Professor Arthur Miller, who likened the development of common-law doctrines to a ship becoming weighted down with barnacles. He explained that, from time to time, it became necessary for a high court to haul the ship out of the water and scrape the barnacles away. I wrote that I hoped that the Supreme Court of California would take the opportunity to scrape away the genuine-issue doctrine when it decided Wilson v. 21st Century Insurance Co., which was then pending before it.

The Supreme Court issued its opinion in Wilson in November 2007. (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 714 [68 Cal.Rptr.3d 746].) When I first read the decision, I was disappointed because the Court did not completely do away with the doctrine. But on further review of the decision, I came to believe that most of the barnacles had, in fact, been scraped away, and that the genuine-issue doctrine after Wilson was a far more limited, less potent defense for insurers, and that many bad-faith cases that might formerly have been disposed of on summary judgment would now go to a jury.

The birth of the genuine-dispute doctrine

The genuine-issue defense was first announced in Safeco Ins. Co. of America v. Guyton (9th Cir. 1982) 692 F.2d 551, an appeal from a judgment awarding declaratory relief to the insurer, finding that it owed no coverage for property damage caused by heavy rains. The Ninth Circuit found that the district court had misapplied the doctrine of concurrent causation, and reversed its finding of no coverage. But the court affirmed summary judgment of the insured’s counterclaim for bad faith, explaining:

Although the district court did not specify the grounds on which it entered judgment for Safeco on this cause of action, it may have concluded that since the policy in dispute involved a genuine issue concerning legal liability, Safeco could not, as a matter of law, have been acting in bad faith by refusing to pay on the Policyholders’ claims. Although we conclude that the Policyholders’ losses are covered by the policy if third-party negligence is established, we agree that there existed a genuine issue as to Safeco’s liability under California law. We therefore affirm the dismissal of the Policy-holders’ claims of bad faith.

(692 F.2d at 551, emphasis added.)

The doctrine was first applied by a California court in 1991, in Opsal v. United Services Auto. Assoc. (1991) 2 Cal.App.4th 1197 [10 Cal.Rptr.2d 352]. Opsal was also a concurrent-cause case arising out of a claim for earth movement. The carrier denied coverage based on its reading of a footnote in Garvey v. State Farm Fire & Cas. Co. (1989) 48 Cal.3d 395 [257 Cal.Rptr. 292]. The Opsal court rejected the carrier’s view of the law, but held that it was reasonable for the carrier to deny coverage based on its construction of Garvey. Citing Guyton, the court held, “clearly there was a genuine issue . . . under California law” until the meaning of the footnote in Garvey was resolved. (Opsal, 2 Cal.App.4th at 1206.)

The doctrine went unmentioned in the California cases for the next eight years, until Filippo Industries, Inc. v. Sun Ins. Co. (1999) 74 Cal.App.4th 1429 [88 Cal.Rptr.2d 881], where the court declined to apply the doctrine to overturn a bad-faith verdict.

The growth years: 2000 through 2007

The genuine-issue defense became firmly established in California after the decisions in Fraley v. Allstate Ins. Co. (2000) 81 Cal.App.4th 1282 [97 Cal.Rptr.2d 386], Guebara v. Allstate Ins. Co. (9th Cir. 2001) 237 F.3d 987, and Chateau Chamberay Homeowners Association v. Assoc. International Ins. Co (2001) 90 Cal.App.4th 335 [108 Cal.Rptr.2d 776]. As of April 2008, Fraley’s discussion of the genuine-issue doctrine has been cited by 17 California appellate decisions, and in 29 federal decisions. Chateau Chamberay’s discussion of the doctrine has been cited in 24 California appellate decisions and 25 federal decisions.

Guebara was the first decision to take a hard look at the doctrine. There, the Ninth Circuit held (over a dissent by Judge Betty Fletcher), that the doctrine could be applied to both legal and factual disputes. But the court provided a non-exhaustive list of factors that could preclude operation of the doctrine in a given case: (1) the insurer was guilty of misrepresenting the nature of investigatory proceedings, (2) the insurer’s employees lied during the depositions, or to the insured, (3) the insurer selected its experts dishonestly, (4) the experts were unreasonable, or (5) the insurer failed to conduct a thorough investigation. Guebera, 237 F.3d at 987.)

Chateau Chamberay was the California appellate equivalent to Guebara, also finding that the doctrine was applicable to both factual and legal disputes, and adopting the list of factors that would allow a court not to apply the doctrine in a particular case.

Courts continued to apply the doctrine with increasing frequency and more broadly. In Rappaport-Scott v. Interinsurance Exchange of the Automobile Club (2007) 146 Cal.App.4th 831 [53 Cal.Rptr.3d 245], the court applied the doctrine at the pleading stage, affirming a demurrer to a bad-faith action because the complaint (supposedly) showed that, as a matter of law, there was a genuine dispute.

In CalFarm Ins. Co. v. Krusiewicz (2005) 131 Cal.App.4th 273, 287 [31 Cal.Rptr.3d 619] and in Morris v. Paul Revere Life Ins. Co. (2003) 109 Cal.App.4th 966, 973-974 [135 Cal.Rptr.2d 718], the same court held that, under the genuine-dispute doctrine, “If the conduct of the insurer in denying coverage was objectively reasonable, its subjective intent is irrelevant.”

Relying on this rule, in Starr-Gordon v. Massachusetts Mutual Life Ins. Co. (E.D. Cal. 2006) 2006 WL 3218778, a district court held that the genuine-issue doctrine compelled it to grant summary adjudication against the policyholder on her bad-faith claim, even though the record would support a jury finding that the carrier fraudulently terminated her benefits with knowledge that she was entitled to these benefits.

Not all of the genuine-issue decisions during this period applied the rule broadly. Perhaps the first case to affirmatively limit the scope of the doctrine was Amadeo v. Principal Mut. Life Ins. Co. 1161 (9th Cir. 2002) 290 F.3d 1152, which held that the genuine-issue defense does not apply in a case where a reasonable jury could find that the insurer’s conduct was unreasonable. The court explained:

The genuine issue rule in the context of bad faith claims allows a district court to grant summary judgment when it is undisputed or indisputable that the basis for the insurer’s denial of benefits was reasonable — for example, where even under the plaintiff ’s version of the facts there is a genuine issue as to the insurer’s liability under California law. (Safeco Ins. Co. of Am. v. Guyton (9th Cir. 1982) 692 F.2d 551, 557.) In such a case, because a bad faith claim can succeed only if the insurer’s conduct was unreasonable, the insurer is entitled to judgment as a matter of law. On the other hand, an insurer is not entitled to judgment as a matter of law where, viewing the facts in the light most favorable to the plaintiff, a jury could conclude that the insurer acted unreasonably. [Citation omitted.] . . . . Although summary judgment may be awarded under the genuine-issue rule where the insurer reasonably construes ambiguous language in its policy, see, Guebara, 237 F.3d at 993 (discussing cases), summary judgment is not appropriate when the insurer’s interpretation of the policy is sufficiently “arbitrary or unreasonable” that a jury could conclude it was adopted in bad faith. [Citations.]

(Amadeo, 290 F.3d at 1161-1162.)

Zangarter v. Provident Life and Acc. Ins. Co. (9th Cir. 2004) 373 F.3d 998, 1010, cites this language with approval and adds that, “Though the existence of a ‘genuine dispute’ will generally immunize an insurer from liability, a jury’s finding that an insurer’s investigation of a claim was biased may preclude a finding that the insurer was engaged in a genuine dispute, even if the insurer advances expert opinions concerning its conduct.” (Id. at 1010.)

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Appellate lawyer, Jeffrey EhrlichCalifornia appeals lawyer, Jeffrey Isaac Ehrlich, is the principal of the Ehrlich Law Firm with Los Angeles County law offices in Encino and Claremont, California. He is certified as an appellate specialist by the California Bar’s Committee on Legal Specialization, and is the editor-in-chief of the Consumer Attorneys of Southern California’s Advocate magazine.

The ever-expanding genuine-dispute doctrine, and how to deal with it

Published Articles

The ever-expanding genuine-dispute doctrine, and how to deal with it

Advocate. August 2007 | Download .pdf
By Jeffrey Isaac Ehrlich

Next Page | 1 | 2 | 3 | 4 | Previous Page


California Supreme Court, San Francisco, Earl Warren Building

Ehrlich Law Firm wins insurance bad-faith victory in California Supreme Court
Nov./Dec. 2007 – Insurance companies in California can no longer prevail in bad-faith lawsuits brought by their policyholders simply by showing that there was a “dispute” about whether the insurer should pay the claim. In Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, the Supreme Court reined in the so-called “genuine dispute rule” that had become the insurance industries’ most potent defense in bad-faith cases, holding that the rule only applied at the summary-judgment stage, and then only in cases where a jury would be unable to make a finding that the insurer had acted unreasonably. The Wilson ruling makes it much harder for insurers to obtain summary judgment in bad-faith lawsuit. Download Wilson v. 21st Century Insurance Decision (.pdf)

The legal equivalent of kudzu

The genuine-dispute doctrine has become the legal equivalent of kudzu – an invasive species known for its explosive growth. “[T]he genuine dispute doctrine ‘holds that an insurer does not act in bad faith when it mistakenly withholds policy benefits, if the mistake is reasonable or is based on a legitimate dispute as to the insurer’s liability.” (Delgado v. Interinsurance Exch. of the Automobile Club of So. California (2007) __ Cal.App.4th __, __, __ Cal.Rptr.3rd __, [2007 WL 1810226], citing Century Surety Co. v. Polisso (2006) 139 Cal.App.4th 922, 949 [43 Cal.Rptr.3rd 468].)

This doctrine has become the first line of defense relied on by insurance companies who have been sued for insurance bad-faith in California. As originally adopted it was a tool that allowed trial courts to grant summary judgment in appropriate first-party, bad-faith cases, when there was a “genuine dispute” about the controlling legal principles that governed the claim. But in the last five or six years, its use has expanded to virtually every aspect of bad-faith litigation.

It now applies to factual, as well as legal disputes (Guebara v. Allstate Ins. Co. (9th Cir. 2001) 237 F.3d 987, 993-994; Chateau Chamberay Homeowners Association v. Assoc. International Ins. Co (2001) 90 Cal.App.4th 335, 348 [108 Cal.Rptr.2d 776]); to third-party as well as first-party claims (Delgado v. Interinsurance Exch. of the Automobile Club of So. California, __ Cal.App.4th at __ [2007 WL 1810226 at *11], and to judgments entered for the insurer based on a demurrer (Rappaport-Scott v. Interinsurance Exchange of the Automobile Club (2007) 146 Cal.App.4th 831, 839 [53 Cal.Rptr.3rd 245].) And even though it has principally been used as a means to justify summary judgment – meaning that a finding of a genuine-dispute is a legal issue determined by the trial court – recently-proposed modifications to the CACI bad-faith instructions would, in some cases, ask the jury to determine whether there was a genuine dispute. (These proposals are still under consideration by the Judicial Council.)

Old-school bad faith

It was not always this way. The existence of a “genuine issue” as a basis to defeat a bad-faith claim was recognized until 1982, in Safeco Ins. Co. of America v.Guyton (9th Cir. 1982) 692 F.2d 551. No published California decision recognized the defense until Opsal v. United Services Auto. Assoc. (1991) 2 Cal.App.4th 1197 [10 Cal.Rptr.2d 352], and the doctrine was not cited a second time in California for another 8 years, until Filippo Industries, Inc. v. Sun Ins. Co. (1999) 74 Cal.App.4th 1429, 1438 [88 Cal.Rptr.2d 881].)

By the time Filippo Industries was decided, California courts had been dealing with bad-faith cases for more than 40 years – since Communale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 658 [328 P.2d 198]. And they had been dealing with first-party bad-faith cases since at least 1973, when the Supreme Court decided Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 574 [108 Cal.Rptr. 480]. How did California courts deal with bad-faith cases in the decades before the genuine-issue doctrine was invented?

Exactly the way they deal with them now. This is because the genuine-issue doctrine is neither a doctrine nor an affirmative defense; it is merely a shorthand way of stating that the plaintiff ’s bad-faith claim is not sufficient to show that the insurer acted unreasonably when it denied the claim. The Ninth Circuit makes this clear in Amadeo v. Principal Mut. Life Ins. Co., 290 F.3d 1152, 1161(9th Cir. 2002), explaining:

The genuine issue rule in the context of bad faith claims allows a district court to grant summary judgment when it is undisputed or indisputable that the basis for the insurer’s denial of benefits was reasonable—for example, where even under the plaintiff ’s version of the facts there is a genuine issue as to the insurer’s liability under California law. Safeco Ins. Co. of Am. v. Guyton, 692 F.2d 551, 557 (9th Cir. 1982). In such a case, because a bad faith claim can succeed only if the insurer’s conduct was unreasonable, the insurer is entitled to judgment as a matter of law.

Seen in this light, the genuine-issue doctrine is neither all that imposing, nor even necessary. Since all it amounts to is a finding that the insurer acted reasonably as a matter of law, there is no case in which the doctrine was properly applied to grant judgment for the insurer that could not have been similarly decided without the use of the doctrine. If the circumstances of the case allow the insurer to show that it acted reasonably as a matter of law, then it wins the bad-faith case, with or without the genuine-issue doctrine.

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Appellate lawyer, Jeffrey EhrlichCalifornia appeals lawyer, Jeffrey Isaac Ehrlich, is the principal of the Ehrlich Law Firm with Los Angeles County law offices in Encino and Claremont, California. He is certified as an appellate specialist by the California Bar’s Committee on Legal Specialization, and is the editor-in-chief of the Consumer Attorneys of Southern California’s Advocate magazine.