More than ten years ago, policyholders sued the Continental Casualty Company (CNA) for the interpretation of certain long-term care policies. A settlement resulted in CNA agreeing, among other things, to offer a new, alternative benefit to policyholders. In Kathleen O & # 39; Keeffe v Continental Casualty Compan y, Nos. 20-3014, the United States Court of Appeals for the Sixth Circuit (August 27, 2020) challenged the parameters of the alternative benefit.
Before her death, Vivian O & # 39; Connell was insured under a long-term care policy issued by the CNA. The insurance described the cost of a policyholder's medical needs later in life by paying a daily long-term care benefit (LTCF benefit) during a "benefit period" chosen by the policyholder (in this case six years). In addition to the limitation period, the LTCF benefit was subject to a daily repayment limit (in this case, $ 60 per day). Furthermore, the LTCF benefit could only be used in facilities that meet strict qualifications.
In 2009, CNA policyholders initiated a class action lawsuit challenging CNA's standard to determine which long – term facilities qualify for LTCF benefit coverage. Pavlov v . Cont & # 39; l Cas . Co ., No. 5: 07CV02580, 2009 WL 10689011 (N.D. Ohio October 7, 2009). The case was resolved. As part of the settlement, the CNA agreed that a facility would qualify if it had a nurse on site for five hours a day, seven days a week. For policyholders in facilities that did not even meet the lower bar, the settlement agreement offered a second alternative, the "Alternative plan for care (" APC "). For policyholders using unqualified facilities, the settlement APC benefit would pay the policyholder the greater of 25% of the daily LTCF benefit limit or the actual daily cost of the facility, limited by the lower of the daily LTCF benefit limit or the actual daily cost of the facility.
The Pavlov agreement contained a clause claiming that a breach of its provisions would be a breach of contract, not a breach of a court decision. A second clause stated that the "change management change" relating to the nurse order – in itself exclusively part of the LTCF benefit and not the APC benefit of the insurance benefit – "does not affect any other period of the insurance."
The current case
O & # 39; Connell received two years' LTCF benefits before moving to a non-qualified facility. At the new facility, CNA provided its APC benefits under the Pavlov agreement. The CNA ended the settlement of the APC payments after four years, claiming that O & # 39; Connell had exhausted his collective benefit period of six years. O & # 39; Connell claimed that the CNA had violated its Pavlov conciliation obligations; that the CNA's conduct amounted to bad faith under Illinois law; and that she was entitled to law firms under Illinois law.
The district court granted CNA's request for termination. The interpretation of the Pavlov agreement and O & # 39; Connell's policy, the district court held that the limitation of the benefit period applied to both LTCF benefits and Pavlov APC benefits. Similarly, since the policy's maximum dollar benefit acts as a ceiling (but not a floor) on the sum of APC and LTCF benefits, the district court rejected O & # 39; Connell's argument that she was entitled to the full amount. The conclusion that the CNA did not violate the Pavlov agreement rejected the district court O & # 39; Connell's remaining claims.
The core of this appeal is the district court's reading of Pavlov Agreement along with O & # 39; Connell's original policy.
In order to receive the Pavlov APC benefit, the policyholder must meet all the requirements for the LTCF benefit, except for the hospital medical requirement. In exchange for the increased flexibility in the facilities you can choose from, the policyholder receives benefits that are lower than those guaranteed by the LTCF benefit. Under the APC benefit, the policyholder receives at most either the actual cost of the facility or a quarter of the LTCF benefit, with the amount limited by the lower of either the actual facility cost or the LTCF benefit limit. And as a reduced version of the LTCF benefit, the Pavlov APC benefit cannot logically exceed the LTCF benefit. That is, Pavlov the APC benefit, as a minor form of LTCF benefit, shares the same benefit time limit and thus terminates at the same time.
As a general question, policyholders (including O & # 39; Connell) can purchase insurance with a longer benefit period, says O & # 39; Connell. And as for the Pavlov agreement, it does not require O & # 39; Connell to accept either the LTCF benefit or the settlement APC benefit offered. She remains free, as she was before the Pavlov deal, to negotiate an alternative APC advantage more to her liking. What O & # 39; Connell could not do is to both accept Pavlov the APC benefit and at the same time rewrite the rules for the benefit without the agreement of her insurer.
To accept O & # 39; Connell's reading of Pavlov Agreement, one would have to believe that the CNA agreed to extend the coverage to make full payments in the form of LTCF benefits or full payments in the form of Pavlov APC benefits.
The Pavlov agreement's APC benefit does not refer to "maximum dollar benefit." Clues in the Pavlov agreement further undermine the notion that the Pavlov APC benefit corresponds to the APC benefit in O & # 39; Connell's policy. First, the Pavlov agreement uses the term "APC benefit" to refer to the APC benefit policy, but uses the term "APC benefit or housing" to refer to Pavlov APC . For another, the distinct APCs have distinct features. APC benefit does not guarantee O & # 39; Connell an unlimited benefit period, although it does allow O & # 39; Connell to negotiate an alternative benefit period, but not a unilateral right to choose one.
The Pavlov agreement is not an insurance policy. Rather, it is a product of both harsh litigation and negotiated compromise between sophisticated lawyers. The sixth circle concluded that the best treatment of the Pavlov agreement is that the Pavlov APC benefit expires at the end of a policyholder's benefit period.
Because O & # 39; Connell does not violate both claims of infidelity and law firms fail.
A solution to an insurance dispute is not, and can never be, an insurance unless the settlement created a new insurance. The Pavlov agreement only set out how CNA policy should be interpreted. Because its language was clear, the court interpreted it so that it could be read and understood in recognition of the fact that it was created by careful lawyers on both sides of a major dispute. The attempt to make it an insurance policy so that ambiguities are interpreted against the insurer did not work because it was not to take it or leave it contract.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance management, cheating and insurance fraud almost equally for insurers and insurers. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance industry. He can be found at http://www.zalma.com and firstname.lastname@example.org.
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