Rescission in the Modern Age

Posted on March 16, 2016 08:15 by Gary L. Howard

Although the equitable remedy of rescission dates back to the common law of Great Britain, it remains an effective tool for insurers.  I look forward to presenting the topic of Rescission in the Modern Age: Overlooked Tool or Obsolete Relic? at the upcoming annual DRI Life, Health, Disability and ERISA Seminar.  

The notion that both parties to an agreement must operate in good faith is a historical tenet of contract law.  Further, insurance policies are considered to be contracts of utmost good faith.  For this reason, and because parties to insurance contracts could be more vulnerable to misrepresentation or concealment of material fact than other contracting parties, rescission has been applied to insurance policies to allow an insurer to void a contract. 

Today, state laws vary as to the requirements an insurance company must meet to employ the remedy of rescission to void an insurance contract.  Some states merely require a material misrepresentation in the policy application to rescind the contract.  In this context, a material misrepresentation generally occurs when the insured makes an untrue statement that would have changed the rate at which insurance would have been provided or which would have changed the insurer’s decision to issue the contract.  Typically, the burden is on the insurer to show that there is a material misrepresentation.  In these states, the insurer must simply show that it would not have issued the policy had it known the true facts that were misrepresented.  At the other end of the spectrum, some states may require that intent to deceive be proven in order to rescind the contract.  Additionally, some states have specific standards for rescission of life, health, and disability insurance policies that differ from other types of insurance.  Finally, another wrinkle in the availability of rescission has been the Affordable Care Act.  Under the ACA, rescission is illegal except in cases of fraud or intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage.  If a plan or health insurance issuer wants to rescind coverage, the ACA requires thirty days’ written notice and proof that an insured intentionally put false or incomplete information in his or her application.

In addition to the varying laws affecting an insurer’s access to rescission, we will cover incontestability clauses, arguments against rescission that an insurer is likely to encounter and relay some practical pointers on rescission.

As always, I look forward seeing you all in Chicago!


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Categories: ERISA | Seminar

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I wanted to highlight one of the sessions to be held during DRI's Appellate Advocacy seminar on February 10-12, 2016: Discretionary Review in the Federal Courts.  

The speakers - the Honorable Sandra L. Lynch of the United States Court of Appeals for the First Circuit, and John H. Beisner of Skadden Arps in Washington, D.C. – will discuss what counsel can do to increase the chances of success when seeking discretionary review in the federal circuit courts, and cover the assorted statutes and rules that allow for discretionary review, including Rule 23(f) review of class certification rulings.

The seminar registration page is available here

We hope you will join us in Scottsdale!  

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Categories: Appellate Advocacy | Seminar

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The 2016 DRI Appellate Advocacy Seminar

Posted on January 20, 2016 08:54 by Sara Kobak

I am writing to encourage folks to attend the upcoming 2016 DRI Appellate Advocacy Seminar at the Scottsdale Resort at McCormick Ranch in Scottsdale, Arizona.

I have been involved with organizing the seminar panel on appellate arbitrations, which features: Eric Tuchmann, General Counsel for the American Arbitration Association (AAA); Michael Garone, appellate practitioner and counsel of record for the petitioner in Hall Street Associates v. Mattel, 552 U.S. 576 (2008); and Maura Abeln Smith, former chief legal officer for a number of major companies including Owens Corning, PepsiCo, International Paper, and most recently, the Delhaize Group.  The panel discussion is going to be very interesting and includes insights on strategic considerations with handling arbitration appeals from different perspectives.

If you haven't attended a DRI Appellate Advocacy seminar in the past, I highly recommend it.  My attendance at a past seminar opened doors for me to get more involved with DRI, and it is a great way to connect with appellate litigators from across the country.  The deadline for early registration discounts and hotel discounts is January 26, so I recommend signing up soon. 

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In most states, the legal requirements a Plaintiff must meet to bring a medical malpractice claim are similar if not identical to what is required in order to bring a claim against a nursing home or assisted living facility.  One distinction between these types of cases, however, has been in the numerous claims and legal theories of recovery that Plaintiffs have historically brought against long term care providers in the same complaint.  Some states have enacted legislation in order to end the distinction between traditional “medical malpractice” claims and Adult Protection Act claims, Negligence Per Se claims, and so-called “custodial care” or ordinary negligence claims against nursing facilities.  For instance, the Tennessee Civil Justice Act of 2011 deleted the term “medical malpractice” from the Tennessee code books altogether.  It was replaced, instead, with a broader cause of action called a “health care liability action.”  Some notable provisions of the Act are as follows:         

- There is no longer any formal claim called “medical malpractice”;

- “Health care liability action” is a defined term in the statute and includes any civil action regardless of the theory of liability on which the action is based alleging that a health care provider caused an injury related to the provision of, or failure to provide “health care services.”

- “Health care provider” is a defined term and includes physicians and nurses but now also specifically includes LPNs, advance practice nurses, physician assistants, nursing technicians, pharmacy technicians, orderlies, and CNAs.

- “Health care services” is a defined term and includes care provided not only by physicians and nurses but now also specifically includes care provided by LPNs, pharmacists, orderlies, CNAs, advance practice nurses, physicians assistants, nursing technicians and also includes staffing, custodial or basic care, positioning, hydration and similar patient services.   

- Long term care facilities and their employees, such as LPNs, CNAs, and orderlies are “health care providers” whose care and services are subject to the statute’s requirements.  

- Many claims which traditionally fell under ordinary negligence (i.e. care provided in a nursing home by CNAs) are now defined as health care liability claims.  

- A Plaintiff must bring such an action in accordance with the provisions of this Act.  

Regarding the change in the law, one Tennessee opinion, Parker v. Portland Nursing & Nursing Rehab, 2012 Tenn. App. LEXIS 606, FN. 4 (Tenn. Ct. App. Aug. 30, 2012), is instructive because the case was decided after passage of the Civil Justice Act but plaintiff’s claims accrued prior to enactment.  The plaintiff initially sued the defendant nursing homes for ordinary negligence before amending her complaint to add a medical malpractice claim.  The Court allowed the amendment and applied the prior law (distinguishing between ordinary negligence (custodial care) and medical malpractice) while acknowledging the change in the law for claims that accrued after the relevant date of the Act.  The Court noted: “. . .[C]laims for ordinary negligence and medical malpractice are separate and distinct causes of action. . .”  Importantly, however, the Court added: “Both parties note that the passage of the Tennessee Civil Justice Act of 2011 ended this distinction and created a new cause of action of a "health care liability" claim.” (See 2011 Tenn. Pub. Acts ch. 510). Id. at FN 4 (emphasis added).  Clearly, the “Civil Justice Act” replaced “medical malpractice” and expanded the definition of a “health care liability claim” to include the type of claims commonly alleged against nursing homes and long term care providers.

For those interested in further discussion of this topic and learning other ways in which nursing home/ALF litigation is different from medical malpractice litigation, DRI’s Nursing Home/ALF seminar is right around the corner – September 10-11, 2015 at The Venetian/Palazzo Resort Hotel in Las Vegas, Nevada. Among the many areas discussed, there will be presentation regarding the business side of defending nursing home cases, how plaintiffs’ themes have developed and evolved, and tips and techniques for defending these types of cases from inception through trial.  This is the preeminent seminar for attorneys in private practice, in-house counsel, claims specialists, and other professionals involved in the defense of claims against long-term care facilities, assisted living facilities, and other aging services providers across the country.  Additional information on the seminar can be found here


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Categories: Medical Malpractics | Seminar

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This year’s DRI Fidelity and Surety Roundtable featured some excellent presentations.  One that really caught my attention was Ronald Freidberg’s presentation on “pay-if-paid” clauses and recent case law affecting their enforcement in Ohio.  Contingent payment clauses can be used to the surety’s advantage in defending payment bond claims.  The practical implications of such clauses ensure that the surety will rarely be relying upon these provisions without an active principal.  Practically speaking, if the owner or upstream contractor is withholding money from the principal and the principal is using that withholding of money as a defense to a downstream contractor, they are usually going to be actively involved in the litigation related to the project and the defense of the claim.   It is rare that a principal will simply walk away from money owed on the project after the work has been performed or the material has been delivered.  Still, the surety must be knowledgeable of these defenses.  There is no doubt that these clauses can be used to the surety’s advantage in defending payment bond claims. 

Several questions arise every time a surety comes across a contingent payment clause.  How are these clauses enforced and what are the practical differences between pay-if-paid clauses and pay-when-paid clauses?  While there may be headings that designate a certain contractual clause as a “contingent payment provision,” it is rare that the construction contract will be drafted with actual heading titled: “pay-if-paid” or “pay-when-paid.”  What happens when there is not an active principal?  Can the surety, as a secondary obligor, rely upon this defense just like the other defenses of the principal?

Application of a Pay-If-Paid Clause versus a Pay-When-Paid Clause

Both pay-if-paid and pay-when-paid clauses are “contingent payment clauses.”  While their labels are only separated by one word and they are both risk-shifting provisions, their applications can be wildly different.

Generally speaking, a pay-if-paid clause makes payment from the owner or the upstream contractor a condition precedent to payment from the principal to the downstream contractor.  A pay-when-paid clause, on the other hand, only deals with the timing of the obligation to pay the downstream contractor. At some point under these pay-when-paid clauses, when it becomes clear that the owner or upstream contractor is simply refusing to pay and is not simply withholding payment, the principal will become liable for the amounts owed to the downstream contractor.  This is generally a fact intensive inquiry and can be affected by such circumstances as the length of delay in payment, the reason for non-payment, and the downstream contractor’s performance on the project.

Interpreting a Contingent Payment Clause as Pay-If-Paid or Pay-When-Paid

Whether either clause will be upheld is a very jurisdictionally specific question.  Some jurisdictions favor the right to contract and will enforce these clauses as long as the parties clearly establish that they are shifting the risk of nonpayment to the downstream contractor in the construction contract. Others will practically interpret all clauses as pay-when-paid clauses.  Still others frown on these clauses altogether.    

My home state of Texas is a right to contract state.  Therefore, these provisions will be enforced as long as the parties’ intent to shift this risk to the downstream contactor is clear in the construction contract.  There is no magic language differentiating a pay-if-paid clause from a pay-when-paid clause. However, most Texas case law interpreting a contingent payment clause as a pay-if-paid clause states that the owner’s or up-stream contractor’s payment is a “condition precedent” to the principal’s liability to the downstream contractor.  If this contingency to liability is not clear, the clause very well may be interpreted as a pay-when-paid clause and will only affect the timing of the principal’s liability.  If the contingent payment provision is interpreted as a pay-if-paid, then the clause is subject to the “Texas Contingent Payment Statute,” which provides four scenarios which serve as exceptions to the application of these clauses: (1) the owner’s or upstream contractor’s refusal to pay is caused by the principal’s failure to meet its obligations; (2) the contingent payment clause is contained in a sham contract; (3) the downstream contractor provides timely notice objecting to the enforcement of the contingency payment clause; or (4) the enforcement of the clause would be unconscionable.  The application of any of these exceptions will depend heavily on the facts and circumstances of the claim. 

The Surety’s Ability to rely upon a Contingent Payment Clause

Logically, the surety is entitled to rely upon this defense when it is available to its principal.  It is black letter law that the surety, as a secondary obligor, may rely upon all defenses of its principal to any claim under the bond.  However, I have had claimants argue that it is void as to the surety based upon public policy.  Most statutes requiring a statutory payment bond include language that prohibits the parties from contractually waiving claims under the bond as a matter of public policy.  While most sureties will argue that (1) this is not the intent of such prohibitions and (2) a contingent payment clause is only a defense and it is not a waiver of a claim, the wary surety practitioner should know that such arguments are out there.  The language in the Texas Contingent Payment Statute also suggests that the surety may rely upon these contingent payment provisions.  In discussing the above referenced exceptions, the statute states that “a contingent payor or its surety may not enforce a contingent payment clause to the extent . . . .”   The inclusion of the surety in this language, at the very least, suggests that the surety has the right to enforce these clauses whenever these exceptions do not apply.

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Categories: Fidelity & Surety | Seminar

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What follows is a blog post by me on June 25, 2009.  I can't resist reposting it because the 2015 Insurance Bad Faith and Extra-Contractual Liability Seminar is nine days away.  The Program Chair this year is the below-mentioned Chris Martin.  And the below-mentioned Bill Kobokovich will hold forth on "Handling Multi-Claimant and Multi-Insured Bad Faith Exposures."  (And, of course, Tony Zelle succeded me as Chair of the Insurance Law Committee.)  What is old is new again.  And I predict another synergistic and dynamic experience.  I'll see you there.  Meanwhile, here's that blog post, vintage 2009:   

"Were you at the bad faith seminar in Boston last week? Wasn’t it great? Historically, the Insurance Law Committee has done this program every other year. People who do bad faith litigation, or handle that kind of claim, really look forward to it. In my opinion, there was no disappointment this year. Congratulations to the program chair and vice chair, Tony Zelle and Bill Kobokovich.

There were many high points of the seminar. One of the best was a panel discussion on litigating “institutional bad faith.” The panel consisted of the aforementioned Bill Kobokovich (Travelers), Chris Martin (Martin Disiere, et al) and Richard Fabian (RiverStone). A lot of people told me how much they learned from the panel. The really cool part was that Chris had just gotten a defense verdict, in an institutional bad faith case against Bill’s company, the week before. And, get this; the senior partner of the plaintiff law firm that lost the case was in the audience there in Boston. I don’t believe he submitted any questions to the panel. : )

In any event, I felt the whole program had an outstanding “vibe.” The education, networking and collegiality were synergistic, creating a dynamic atmosphere. Did you feel the same way? To me, the atmosphere in a seminar can make all the difference in the world.

I don’t see how anyone who handles bad faith matters can miss the Insurance Law Committee’s semi-annual seminar." Click here to register for the DRI Insurance Bad Faith and Extra-Contractual Liability Seminar in Chicago, June 17–19. 


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More and more jurisdictions are requiring retailers use eco-friendly containers, packaging, etc.  In addition, business are voluntarily switching to those products as part of their sustainability strategy.  An important concern in the future will be whether these eco-friendly containers adequately and safely protect the public.  It wouldn't surprise me in the very near future to see a lawsuit arise out of a customer injury due to a weaker, biodegradable container that failed in some respect.  Many of our clients could find ourselves in the "chain of liability" lawsuit, including the retailer, the maker of the container, the maker of the materials, etc.  Exterior lighting of a retail establishment is another "green" issue retailers are facing.  Many cities and municipalities are requiring retailers to use less energy lighting their properties.

What has your company done or what have you advised your clients to do to protect against this liability?  What should trump...public safety or the environment? 

Christian Hardigree of Kennesaw State University will be addressing many of these issues during his discussion at the Retail and Hospitality Litigation and Claims Management Seminar in Chicago (May 7–8) titled The Legal Pitfalls of Going Green in the Food and Beverage Industry.

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Categories: Retail | Seminar

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It the fast-paced world of health care, it is easy to forget the simple things – like notifying your state licensing board about address changes. It seems trivial, but there may be consequences for a physician who fails to update her physician profile.

State medical boards have the responsibility and obligation to protect consumers of health care by ensuring that all licensed physicians comply with the laws and regulations related to the practice of medicine. These boards have a process for the public to submit formal complaints, and, once a complaint is made, the board conducts an investigation that includes contacting the physician for a response. But what happens when the physician does not respond?

In my practice of representing physicians before state boards, I have seen instances where the board has requested a response from a physician, and then was unable to locate her for months or a year or more. This is often due to the physician making a move and failing to update her address or physician profile. While this may seem like an innocuous oversight, it can result in significant consequences. In fact, many states have statutes and regulations in place mandating that physicians update their addresses with the relevant medical board within 30 days of relocating. Many physicians, however, do not realize the importance of updating their addresses.

A frivolous complaint made by a disgruntled patient can be easily disposed of with a conscientious response. However, if the physician fails to update her address, the board might not be able to contact her, resulting in a failure by the physician to respond in the requisite amount of time. Such a failure often leaves the board no choice but to take action against the physician, even where the complaint is obviously specious. The failure of the physician to update her status in and of itself could have a significant adverse effect, including public reprimand, monetary fines, impact on reputation, and loss of the ability to attract new patients, acquire affiliations or even obtain insurance coverage.

Another and more critical example is when a physician has an old address on file at the time of license renewal. If a physician does not get a renewal application and fails to renew her license, continuing to practice medicine is in fact practicing medicine without a license. Such an oversight is significant and could be career-ending.

With the prevalence of email communication, licensing boards are often able to notify a physician of a complaint or other issue through alternative methods. While the requirement for maintaining a current physical address is customary, the failure to update a change in electronic addresses is also problematic if an important email is not delivered and/or ignored. Being at the mercy of a state medical board for leniency after failing to respond in a timely manner to an inquiry due to a failure to update any address can be difficult.

A word to any wise professional – make sure the address on file with your state licensing board is up to date.

I will be attending the 2015 DRI Medical and Health Care Liability Seminar, March 12–13, 2015, in San Francisco, where Michael V. Favia, Esq. will present “Defense of Health Care Providers in Administrative Actions.” If you will be there, let me know.

This blog was originally posted to the Professional Liability Advocate blog. Click here to read the original entry. 

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Practice, Practice, Practice

Posted on January 13, 2015 04:44 by Andrew DeSimone

As kids, we heard this all the time, from parents and coaches.  “You will never get any better without practice”: from the piano, to baseball, to gymnastics.  Practice builds muscle memory, and without that practice, without that muscle memory, performers and athletes cannot excel, be it at Carnegie Hall or during March Madness.

As attorneys, our jobs require the same attention to practice, practice, practice.  We need muscle memory to help us through stressful or surprising situations that invariably arise in depositions, at court hearings, or at trial.  How do you conduct a successful voir dire? How do you properly impeach a witness with a deposition?  How do you conduct a Daubert hearing to have plaintiff’s expert excluded at trial?  Without it, trial attorneys confronted with a “surprise” cannot adequately represent their clients.  

In a recent blog post, Chris Bottcher, Chair of the Trial Tactics Committee, discussed the major problem facing litigators today: the lack of exposure to trials and other hearings necessary for attorneys to hone their skills. However, the 2015 Trial Tactics Seminar offers a great opportunity for attorneys of all experience levels to practice, practice, practice their litigation skills. Topics include conducting a Daubert hearing, dealing with surprises at trial, how to conduct a successful voir dire, and many, many others.  

The 2015 Trial Tactics Seminar will be held at Caesar’s Palace Las Vegas, March 18–20, 2015. It happens to be during March Madness. So while you learn from leading trial lawyers across the country to help you build the necessary muscle memory to succeed as a litigator, the top college basketball athletes will be putting their skills to the test after years of practice, practice, practice.  The program will be great. It will be a unique opportunity to learn, connect, and grow. Hope to see you there.  

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Categories: Seminar | Voire Dire

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My DRI Seminar Experience

Posted on January 7, 2015 10:10 by Denise Holzka

While I’m a bit freaked out to acknowledge this milestone, just about ten years ago I attended my first DRI Medical Liability and Health Care Law Seminar.  The following year I was given the opportunity to present at the Young Lawyers Breakout session.  Fast-forward several years later and I was speaking at the main gig for the not-so-young lawyers.  Presenting at both of these conferences, and attending many more, was instrumental in my development as a litigator in this field.  While the preparation of the materials and the presentations added a bit of stress to my otherwise stress-free existence as a New York trial lawyer, it was the productive type.  I wanted to ensure that if I was about to take up an hour of my peers’ time, that I better be a good presenter and have some incredibly useful information to convey.  Although I am modest, I nailed these presentations!  

Presenting and attending DRI’s Medical and Health Care Law Seminar has truly made me a better lawyer and advocate for my clients.  Many of the individuals I met the first time I presented have become life-long friends and colleagues.  As such, I am able to reach out to a diverse network of friends from all over the country whether to discuss business, experts, complex medicine or locate an establishment in their neighborhood to get an adult beverage.  

Personally, perhaps most rewarding, presenting at this seminar allowed me to take the time to appreciate the really important work that we do and the medical institutions and healthcare practitioners we represent.  We are generally so caught up in our work that we forget that we are an integral part of the delivery and quality of medical care.  It is a privilege to practice in this field as it was to present at prior DRI Medical Liability and Health Care Law Seminars.  I encourage you to attend this seminar with assurance that you will meet other professionals who are passionate about the work we do and will undoubtedly provide you with information to hone your skills.

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