As another U.S. Supreme Court term wraps up, I am reminded of the incorrectly but often cited trope by law students summing up the Court’s power: “We may not always be right, but we are final!” (The actual quote, uttered by Associate Justice Robert Jackson in his separate concurring opinion in Brown v. Allen (1953) was, “We are not final because we are infallible, but we are infallible only because we are final.”)
To read the headlines, you would think that the Supreme Court was as dysfunctional as the Congress that confirms the justices. In actuality, they are not. The bulk of the Court’s decisions are rendered either as an unsigned per curium (Latin for “by the court”) opinion, or as a unanimous opinion. While they are not always successful, the sizable number of unanimous or near unanimous opinions are the result of the Court’s efforts to limit most of its rulings to issues that can garner the support of a strong majority of the justices. Even as the court generally limits its opinions to a focused point, its words often have unexpectedly outsized impacts.
This year’s docket presented big issues involving gun rights, right of the accused, and, of course, the Court’s review of Roe v. Wade. While these cases significantly overshadowed those involving issues related to insurance and claims, they do not have a specific impact on the claims process or the insurance market, and, therefore, will be left to other publications to focus on those specific issues.
Personal Injury and Comp
Very few of the Court’s decisions ever focus on the claims process or the impact its decisions will have on the insurance market. Rather, claims and insurance professionals are left to anticipate how the court’s opinions will impact the claims process or insurance market. This year was no different.
The clearest example of this was United States v. Vaello-Madero. Vaello-Madero was born in Puerto Rico. He spent his entire working career in New York, though, where he paid all federal, state, and local taxes, including his statutory Social Security contributions. He eventually qualified for and received Social Security benefits as a resident of New York. He ultimately returned to Puerto Rico where he continued to receive his Social Security income (SSI) payments until someone noticed that he was living in a U.S. territory; not one of the 50 states. The Social Security Administration terminated his benefits and demanded repayment of what it deemed an overpayment of the amounts he received as a resident of Puerto Rico. Vaello-Madero countered that he was being denied equal protection under the U.S. Constitution.
In an 8-1 decision, the Court held that U.S. territories do not have the same “burdens” as the states, such as paying federal income taxes and, therefore, its residents do not necessarily get to enjoy the same “benefits.” To appreciate the impact of this decision, it is essential to divorce yourself from the fact that Vaello-Madero paid into the Social Security system his entire working life. This decision will have a significant ripple effect on personal injury and workers’ compensation resolutions. Medicare will still require that its interests are protected in any personal-injury resolution, which will include paying into CMS. At the same time, if plaintiffs move from one of the 50 states, the District of Columbia, or the Commonwealth of the Northern Mariana Islands (yes, Congress extended SSI rights to the Northern Mariana Islands, but not Puerto Rico), they will lose the rights they paid for while working, and the funds they had set aside for personal injury or workers’ compensation resolution. An open question also exists as to what will happen if one of these plaintiffs returns to a state, the District of Columbia, or the Commonwealth of the Northern Mariana Islands from Puerto Rico.
Impacts to Coverage
The Supreme Court’s impact on claims and insurance fall into two broad categories: process, and impact to coverage and capacity. By expanding or limiting rights or exposures, the Court indirectly influences insurance coverages and capacity. It is anticipated that the 2021-2022 term will be felt in a number of insurance lines.
Qualified immunity—the doctrine that protects public officials who violate a person’s rights in the course and scope of performing their jobs—is a prime example of this. This term, the Court considered two qualified immunity cases: Rivas Villegas v. Cortesluna and City of Tahlequah v. Bond. In both cases, police officers were accused of excessive force, including one claimant who died. The Court found that, in both cases, the actions did not rise to the level that qualified immunity should be forfeited, but acknowledged that there is some point on the continuum where that privilege is lost.
From where the claims and litigation folks sit, this means that governmental entities still need to build their risk portfolios with sufficient deference to the issue. As litigation on this topic continues to proliferate, and the Court’s refusal to make qualified immunity an absolute defense, the law enforcement liability coverage market will continue to harden.
In Hughes v. Northwestern University, the school’s retirement administrators were challenged over their alleged violation of fiduciary ERISA duty of prudence required of all plan fiduciaries in administering its retirement program. The administrators responded to the 2016 suit asserting that the participants had the right to decide on their investment programs and that the fees, which were alleged to be violative of the administrator’s duties, were available to the investors as part of their decision-making process.
The Court sided with the retirees. Had the administrators succeeded in their defense, they would have gained a significant shield to litigation for the market where, according to Chubb, excessive fee filings increased four-fold from 2019 to 2020. The unanimous Court’s refusal to close the door on this type of challenge does not change the status quo in the legal community and will continue to harden the fiduciary liability coverage market, resulting in carriers imposing sub-limits, excluding fee coverage claims, and facilitating greater scrutiny of processes and procedures when writing coverage.
In Whole Woman’s Health v. Jackson, plaintiffs challenged a Texas law that allows private citizens to enforce the state’s abortion restrictions through “private civil actions.” The law allows for actual damages, attorneys’ fees, and costs against those “aiding and abetting” in most abortions in the state.
The Court allowed the law to stand for now, as the nature of the challenge was procedural; not substantive. Almost immediately after the Court announced its decision, other states started promulgating similar laws not only involving abortion, but also gun rights. From doctors and health clinics on one side of the issue to gun manufacturers and distributers such as Walmart on the other end of the spectrum, we can anticipate that language regarding the commercial general liability coverage terms for these private civil actions to evolve quickly.
The subtlety of the Court’s impact on the claims and insurance world is often missed, even by us court-watchers. And so it could have been with Boechler v. Commissioner of the IRS. Boechler failed to respond to the IRS until it sought to execute on his property, at which time he had 30 days to file a petition for review. He filed on day 31, at which point the IRS took the position that he was foreclosed, since the 30-day requirement in the regulation served as a statute of limitation. In a unanimous decision, the Court held that, unless the statute made it clear that the time limitation was meant to serve as a statute of limitation, it does not act as one.
Boechler may become the double-edged sword of choice for all litigants. Plaintiffs who miss a statute of limitation, or possibly a statute of repose, will predictably rely on its reasoning, but, so too, will defendants who fail to file an answer in a timely fashion. The language can foreseeably be used to defeat motions predicated on failure to provide discovery in a timely manner. Only time will tell—and time is apparently malleable now—but the defense bar may have an easier time exploiting this decision. For plaintiffs, the statute of limitations is statutory. Time constraints on filing answers are generally embodied in the rules of court.
It is no secret that the Court’s relationship with the Affordable Care Act (ACA) is “complicated” to say the least. The Court has limited the law’s reach at every opportunity. Therefore, it came as no surprise when, in Cummings v. Premier Rehabilitation, the Court took on an enforcement provision of the statute once again.
In the case, Jane Cummings, who is deaf and legally blind, sought physical therapy from Premier Rehabilitation. She requested an American sign language translator to attend her therapy sessions. When the care provider refused, she sued, asserting that they violated the ACA and three other statutes, resulting in emotional distress. In its 6-3 holding that the statutes did not either specifically or implicitly allow a cause of action for emotional distress, the Court removed the specter of large judgments against medical providers.
Process Problems
Two separate cases decided by the Court defined the parameters of the Federal Arbitration Act (FAA). Arbitration is always quicker and less expensive than litigation and provides significant relief to the overburdened judiciary. In Morgan v. Sundance, plaintiff signed an agreement at the time of his hire to submit to arbitration for claims against his employer. Eventually Morgan filed a nationwide collective action asserting that Sundance had violated federal employment law.
The employer defended in court for an extended period of time, then remembered the arbitration agreement it required of its employees. Sundance sought to remove the claim to arbitration but Morgan objected stating that Sundance waived its right to compel arbitration. Sundance successfully argued to the trial and appellate courts that the standard required Morgan to demonstrate that he was prejudiced by delay in asserting their rights. The Supreme Court sided with Morgan, remanding the case to lower court with instructions that a showing of prejudice was not the appropriate standard. The Court has made it clear that if a party wishes to assert their FAA rights, it must do so in a timely fashion.
In a second case, Badgerow v. Walters, the Court made clear that, while the FAA provided jurisdiction to the federal courts, it was for the limited purpose of enforcing the FAA. The statute did not broaden federal jurisdiction to decide matters that it would not otherwise have subject matter jurisdiction over. These cases set up critical guardrails on how parties may use the FAA.
Finally, the end of the 2021-2022 term not only marked major changes both within the claims and insurance industry and in the law, but also major changes within the institution itself. After nearly three decades, Justice Stephen Breyer now retires from the Court and is succeeded by Justice Designate Ketanji Brown Jackson, the first black woman and first public defender in the Court’s 232-year history. What will the effects be? Stay tuned for the first Monday in October to find out.