OTLA Trial Lawyer Spring 2021

13 Trial Lawyer • Spring 2021 and some others are governed by Oregon state law. Under Oregon State insurance law, found in ORS Chapters 743, 743A and 743B, an insurer must provide cer- tain internal appeal types, however, the insurer is free to make those appeals permissive or mandatory. If mandatory, the insured must exhaust administrative remedies before filing suit, but if permis- sive, the insured can skip the appeals and go straight to suit if they so choose. Oregon state law claims are also not dependent on the creation of an admin- istrative record, so developing evidence at earlier stages is not as crucial as it is for ERISA litigation. Kruesi’s claim, however, was not gov- erned by Oregon state law. She received her health benefits from her employer, so like the majority of health claims, it was governed by ERISA. Found at 29 USC § 1001–1461, these statutes regulate pension and financial benefits, but also employer insurance plans. Health plans, disability plans or life plans are com- monly provided as an employment benefit, and when they are, the plans are controlled by ERISA. Those statutes preempt virtually all state law regarding these plans. While there are some exclu- sions to ERISA for government or non-profit employers, the bulk of em- ployees who receive health benefits as part of their employment compensation receive them under an ERISA policy. Under ERISA, the appeals process becomes significantly more important. The documents, arguments and submis- sions from the insured throughout the appeals process makes up what is com- monly referred to as the “administrative record.” If an insured’s administrative appeals to the insurer are unsuccessful, the insured can file suit in federal court to recover benefits. In that suit, the court is generally limited to considering whether the insurer made the correct determination on benefits in light of the administrative record. The court gener- ally will not accept evidence in the suit that was not made a part of the admin- istrative record. The lack of additional evidence at trial means the insured must fully de- velop its case at the appeals stage. This can be difficult and costly, particularly in a case like Kruesi’s where the insurer has denied based on medical opinions, and expert opinions may be necessary to re- but the exclusion. Occasionally, the in- sured’s physician or doctor may be will- ing to assist in the process and provide an opinion at low cost. But more often a client must make a choice between paying for an expert opinion when they are already burdened by medical bills or appealing without a fully developed case. Fortunately, Kruesi’s case did not re- quire an expert. While the insurer had claimed there was a causal connection between the gastric bypass and the her- nia, the policy also included an exception to the exclusion for complications of weight loss surgery. The policy provided that the weight loss exclusion, and a series of others, did not apply to medical ser- vices rendered in a life-threatening emer- gency. There was absolutely no dispute Kruesi’s condition was life threatening, and so with an appeal letter identifying this fact, the insurer reversed its coverage position and paid the claim. Life insurance claims On April 16, 2016, Jerry Nelson trav- eled from his home in eastern Oregon to the coast for work. Upon arriving at the coast, he was experiencing back pain, so he stopped into urgent care. At urgent care, he was seen by a nursing assistant and received a prescription for a non- narcotic painkiller. The nurse prescribed he take one tablet every four to six hours depending on the level of his pain. He was discharged from urgent care at 5:46 pm. He traveled down the road to the local pharmacy and filled his prescription for 24 tablets at 6:28 pm. He checked into his hotel room and was found dead the next day at 11:38 am. When the authorities searched his room, they found the prescription bottle with 12 of the 24 tablets gone. The coroner listed the cause of death as a lethal level of painkiller and Nelson’s heart condition as a contribut- ing factor. Nelson’s wife submitted a claim to her husband’s life insurance carrier. Nelson’s life insurance policies had been pur- chased less than two years before, so the first thing the carrier did was to pull his medical records and attempt to rescind the policies. In all insurance cases, the insured has a duty to accurately present information to the insurer in the application process and fully disclose any information re- quested by the insurer. If the insured makes a misrepresentation or fails to provide material information, then the insurer can void the policy. This process takes on special signifi- cance in the life insurance context. Life insurers generally do not conduct rigor- ous investigations of people purchasing their insurance. More often, they accept the information provided on the applica- tion at face value, and then conduct a rigorous investigation of the insured’s application and medical records when a claim is made. Of course, once a claim is made, the insured has no opportunity to explain or defend any statements made in the application. Any statements that even have a remote possibility of being false or misleading can be seized upon as misrepresentations, providing the in- surer grounds to void the policy. To establish a right to rescind its in- surance policy, an insurer must prove by a preponderance of the evidence that (1) it issued the policy in reliance on the insured’s false representations, (2) the representations were material to the company’s decision to accept the risk, and (3) the insured “either knowingly made false representations, or recklessly made false representations without any knowledge as to whether they were true or false.” Progressive Specialty Ins. Co. v. Carter , 126 Or App 236, 241–42, 868 P2d 32 (1994) (citing Crawford v. See Health Insurance Claims p 14