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March 2011

Insurance Law Quarterly Newsletter

Welcome to Gordon & Rees's Insurance Law Quarterly Newsletter. On a quarterly basis we provide important information about the latest legal developments affecting the ever-changing world of insurance law. Each issue focuses on one topic or area of insurance law through in-depth articles on current issues, combined with practical advice. We also keep you up-to-date on successful outcomes and some of the interesting cases that are being handled by our Insurance Group.

This quarter, we focus on Life, Health and Disability coverage, including ERISA. Please click here for a description of our Life, Health and Disability coverage experience and here for our ERISA coverage experience.

If you have any questions about this issue of the Insurance Law Quarterly Newsletter, please contact:


Ronald Alberts

Ronald Alberts, Partner
Ph: (213) 576-5000

Tad Devlin

Tad Devlin, Partner
Ph: (415) 986-5900


  1. DOL Proposes Expanding Definition of ERISA Fiduciary

  2. District Court Concludes Recently Enacted Washington State Regulation Prohibiting Discretionary Clauses Applies to Existing Plans

  3. Recent Developments in Insurance Coverage Case Law

  4. Recent Successes

  5. About Gordon & Rees's Insurance Practice Attorneys



Doug Scullion

Anna Shiran

Tad Devlin
Caraine Leon Guerrero

The Department of Labor recently issued a proposed rule that would broaden the definition of “fiduciary” by expanding the types of investment advice activities that may give rise to fiduciary status under the Employee Retirement Income Security Act of 1974. The proposed rule would modify a regulation that has remained unchanged for 35 years. It is estimated the final version of the regulation will be effective in late 2011 or early 2012. To read more about this proposed rule, click here.

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Sarah Turner

Sarah Turner 
The United States District Court of Western Washington recently applied a de novo standard of review in an ERISA matter involving a discretionary clause. The Court concluded a recently enacted Washington regulation that prohibits discretionary clauses applied to the claim, even though the Plan at issue had been in effect, and initially approved by the Washington Insurance Commissioner, prior to the enactment of the new regulation. To read more about this case, click here.

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Gordon & Rees LLP Annual Life, Health & Disability Report, 2010

To review Gordon & Rees’s report titled Developments in Life, Health & Disability Case Law, 2010, with a focus on California cases, please click here.

Ninth Circuit Reverses District Court Holding the Plan Administrator Abused its Discretion in Denying LTD Benefits

Salomaa v. Honda Long Term Disability Plan 2011 U.S. App. LEXIS 4386 (9th Cir. March 7, 2011)

In a split decision, the Ninth Circuit reversed a decision of the U.S. Central District which upheld a Plan Administrator’s termination of the insured’s long term disability benefits. The Ninth Circuit held the claim decision was incorrect for a number of reasons, including that the plan administrator had demanded objective tests to establish the existence of a condition (chronic fatigue syndrome) for which there are no objective tests. Read the complete case summary

Deviating From Insurance Code Language Results In Insurer Voluntarily Extending Two-Year Statute of Limitations on Bad Faith Claims

Blue Shield of California Life & Health Insurance Company v. Superior Court (Kawakita) 192 Cal.App.4th 727 (2011)

The California Court of Appeal affirmed a trial court’s order denying an insurer’s motion for summary judgment asserting plaintiff’s bad faith claim was barred by the two year statute of limitations. The Court of Appeal agreed with the trial court’s conclusion that the insurer’s modification of statutorily mandated language effectively extended the statute of limitation to three years. Read the complete case summary

Insurer Not Required To Disclose Lowest Available Premium To Customers

Levine v. Blue Shield of California (2010) 189 Cal.App.4th 1117

The California Court of Appeal affirmed the trial court’s decision granting an insurer’s demurrer to plaintiffs’ putative class-action complaint.  The Court of Appeal held the insurer, a managed health plan issuer, was not required to disclose to its customers the lowest price the insurer would accept for health care coverage. Read the complete case summary

Rescission Not Appropriate Where Non-English Speaking Insureds Not Given Opportunity To Review Application For Accuracy

Nazaretyan v. California Physicians' Service (2010) 1892 Cal.App.4th 1601

The Court of Appeal reversed the trial court’s order granting an insurer summary judgment after the insurer rescinded health insurance coverage because of material misrepresentations contained in the insureds’ policy applications.  The Court of Appeal ruled rescission is inappropriate in light of evidence the broker filled out the non-English speaking insureds’ applications and the insureds were not given an opportunity to review the completed application. Read the complete case summary

Insurer Properly Rescinded Policy Where Insured Failed to Disclose Extensive Treatment And Medication For Serious Medical Conditions

Nieto v. Blue Shield of California Life and Health Insurance Co. (2010) 181 Cal.App.4th 60

The Court of Appeal affirmed a trial court’s order granting an insurer summary judgment after the insurer rescinded health coverage based on material misrepresentations. The Court of Appeal held the insured’s misrepresentations and omissions on the application related to the insured’s extensive treatment and medication for a serious back and hip condition justified the insurer’s policy rescission. Read the complete case summary

Please click here to view more summaries of recent significant case law


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In March, 2011, Los Angeles ERISA attorneys Ronald K. Alberts and Michelle L. Steinhardt and Nevada attorney Joseph Hardy prevailed on a motion to dismiss in favor of defendant Aetna Life Insurance Company in an ERISA health insurance case. The Court concluded the group insurance plan at issue is subject to ERISA and therefore plaintiff's state law claims, including wrongful death, were preempted.

In March, 2011, San Francisco ERISA attorneys Tad Devlin and Caraine Leon Guerrero prevailed on cross motions for judgment in favor of defendant insurers, the plan, and the plan administrator (collectively, “Defendants”) in an ERISA disability case. Deciding the motion on objective instead of subjective evidence, the trial court concluded the claim administrator had properly exercised its discretionary authority in denying plaintiff’s claim after doing everything it could and should have done during claim administration. Read the complete summary of this result

In February, 2011, San Diego Partners Jim Grady and Kevin Alexander and Orange County Senior Counsel Lindsay Hulley received a final ruling from the California Supreme Court which denied plaintiff's Petition for Review of a California Appellate Court’ s decision that had affirmed the grant of summary judgment on all claims in favor of a national insurance company client. Plaintiff originally brought a million dollar plus action against client life insurance company by alleging that an insurance agent’s oral representations controlled over the terms of the actual written life policy and that the insurance company was in breach for failure to adhere to the agent’s oral representations even though they contradicted the policy’s written terms. Read the complete summary of this result

In November, 2010, Los Angeles ERISA attorneys Ronald K. Alberts and Shannon L. Victor obtained a ruling in favor of their insurer client in a Federal Court ERISA case involving the issue of whether Dependent Social Security (DSS) benefits the plaintiff received for his children could be off-set against the plaintiff's long term disability (“LTD”) benefits. Read the complete summary of this result

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Over 75 lawyers at Gordon & Rees dedicate their practice to representing many of the largest domestic and foreign insurers doing business in the United States. Gordon & Rees’s lawyers assist clients with advice, litigation, and training. Our experience includes such matters as coverage disputes under general liability, property, professional liability, and specialty lines of coverage including ERISA and life and health; litigation involving the business of insurance (including sales practices, annuities, and other insurance products); class actions; defense of “bad faith” claims; and appellate advocacy. We tackle the most difficult problems and guide our clients through all aspects of claims of every size and complexity. Click here to meet our lawyers.

Our lawyers are also active in speaking, writing, providing seminars, and blogging about insurance issues. Click here to view our recent Publications and click here to view the latest News, including past and future speaking engagements.

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Life, Health & Disability