Health Insurance Class Action on Out-of-Network Fees: New Jersey Federal Court Addresses Commonality and Predominance in Denying Class Certification

Posted on January 28, 2013 by Wystan M. Ackerman

A recent decision on class certification by a New Jersey federal court addressed commonality and predominance in a manner that may have significant implications for health insurance class actions generally, and its impact could extend more broadly to other insurance class actions.  Franco v. Connecticut General Life Insurance Company, Case No. 07-cv-6039 (SRC) (PS), 2013 U.S. Dist. LEXIS 6482 (D.N.J. Jan. 16, 2013) is one of a number of class actions that have challenged how health insurers pay for services rendered by out-of-network providers, and how “reasonable and customary” charges for such services are determined.  The case focuses on the use of an Ingenix computer database in assessing reasonableness of medical charges.  Analogous issues have been raised in class actions against auto insurers involving Medpay and personal injury protection (PIP) benefits.  The court here denied certification, finding commonality satisfied, but predominance not satisfied: 

  • Commonality:  Under the Supreme Court’s test from Wal-Mart v. Dukes, a plaintiff seeking to establish commonality must “demonstrate that the proposed classwide proceeding is capable of generating ‘common answers apt to drive the resolution of the litigation.’”  Id. at *23.  In Franco, the court found this test satisfied because “Plaintiffs allege, and will attempt to prove at trial, that the Ingenix database was so flawed as to be completely incapable of generating any reliable data concerning what most providers in a relevant geographical area would charge for a health care service.  Their claim that [out-of-network] benefits were improperly denied depends on the common question of whether the Ingenix data was significantly inaccurate or faulty.  . . . Plaintiffs have demonstrated, as required by Dukes, that a common answer to the factual question of whether the Ingenix database was significantly and pervasively flaws will advance the resolution of the entire class’s claims.”  Id. at *23-25.  This type of focus on and contention about the use of a computer database in evaluation of insurance claims is typical in a wide range of insurance class actions, and thus the finding of commonality here may be of concern to insurers (although predominance was not satisfied).  One strategy that a defendant might use in challenging commonality in this kind of case is to urge the court to delve more deeply into the merits with respect how the database was actually used by claim professionals, how the database was populated, etc., and how even if there were a broad-based flaw in the database it would not advance resolution of the case because of individualized issues. 
  • Predominance:  On predominance, the court focused on the “arbitrary and capricious” standard that a court applies under ERISA in reviewing an administrator’s decision.  The court also found it particularly significant that the plaintiff had failed to show that the benefit plans at issue had a uniform or consistent definition of “reasonable and customary” charge.  In fact, Cigna demonstrated significant variation in such definitions.  Id. at *38-41.  The court concluded that, even if this variation in definitions could be addressed in some fashion by narrowing the class or using subclasses, the “arbitrary and capricious” standard for an ERISA violation could not be shown on a classwide basis.  Id. at *43-44.  The court also concluded that, under Third Circuit law, damages must be provable on a classwide basis.  The plaintiffs contended that damages could be calculated simply based on the difference between the amount billed and the amount paid by Cigna.  The court rejected this contention because the policy language would require paying the “normal charge” rather than the billed charge, and those charges might differ for a variety of reasons, which would require individualized proof.  Id. at *49-50.  The court also cited to the rejection of “trial by formula” in Wal-Mart v. Dukes.  The court explained that to allow the plaintiff’s proposed method of calculating damages “would deprive Cigna [of] the opportunity for an accurate analysis of the amount necessary to make each class member whole and would threaten to modify the parties’ rights under ERISA.”  Id. at *56.  The Supreme Court’s rejection of “trial by formula” continues to be critical in lower courts’ analysis of class certification issues.  The subject of how the need for an individualized determination of damages factors into a class certification decision may be addressed further by the Supreme Court in Comcast Corp. v. Behrend (for more on this case, see my November 9, 2012 blog post about the oral argument, and June 26, 2012 blog post about the grant of certiorari). 

Discovery By Objectors to Class Action Settlement: Montana Supreme Court Opens Door to Discovery

Posted on September 28, 2012 by Wystan M. Ackerman

A recent 4-3 decision by the Montana Supreme Court allows objectors to a class action settlement to take fairly broad discovery regarding the terms of the settlement, potentially including deposing class counsel regarding the negotiations and mediation, notwithstanding a Montana statute providing for confidentiality of mediations.  This decision demonstrates the importance of recognizing that, although some courts will protect the confidentiality of the class action settlement discussions, other courts may not, and thus the parties involved may want to conduct themselves as if the discussions are not confidential. 

Pallister v. Blue Cross & Blue Shield of Montana, Inc., No. DA 11-0431, 2012 MT 198, 366 Mont. 175, 2012 Mont. LEXIS 276 (Mont. Sept. 5, 2012) involved a settlement of class action in a case involving allegations that health insurance claims were improperly denied based on exclusions that were subsequently disapproved by the Montana insurance commissioner.  The majority remanded the case to allow objectors to the settlement to take fairly broad discovery, despite a lack of any showing of collusion or misconduct in connection with the settlement.  Here is a key passage from the opinion:

The record here reveals that the objectors' efforts to obtain information about negotiations and the underlying settlement were stymied at every critical turn. The court denied them the right to intervene and denied their request to conduct discovery. The court issued a protective order precluding the dissemination of any settlement information. Thus, the court's conclusion in its order denying the request for discovery that Pallister had failed to show independent evidence of unfairness begs the question of just how such evidence could be obtained in such a closed proceeding. Moreover, the submission by BCBSMT of affidavits and disclosures of the nature and amount of the settlement claims on the morning of the Fairness Hearing—the very information which the objectors had long sought—effectively denied the objectors any reasonable opportunity to digest and analyze the information. The last minute production of this information also arguably impaired the court's ability to determine in a comprehensive manner whether the settlement was "fair, reasonable and adequate."

We emphasize that in reaching this decision, we are not inferring or even suggesting that there was collusion or misconduct of any sort among the parties and their attorneys. Rather, we are simply concluding that in a settlement only class action case— a matter of first impression for this Court—the heightened scrutiny required in such an action mandates that there be sufficient information provided to the class representatives, any objectors, and the district court to enable the parties and the court to reach a well-informed decision of whether the proposed settlement is fair, adequate and reasonable.

On remand, the court shall allow the objectors the opportunity to conduct limited discovery. They should be allowed to explore how the class was chosen, how the medical coding was conducted, and how and why the particular compromises of claims were determined. They should also be allowed to explore how the Settlement Agreement and class counsel's fee were negotiated, and any other area of inquiry the objectors and the court conclude is relevant.

. . .

Citing § 26-1-813, MCA, the dissent argues that our ruling "infringes upon the confidentiality that accompanies settlement negotiations and mediations." We respectfully disagree. Section 26-1-813(1), MCA, contemplates a dispute resolution process whereby a mediator "assists disputing parties to resolve their differences." The parties who participate in such a statutory process are adversaries. By contrast, the objectors' claims here are aligned with those of the class, and are indeed dependent upon the actions of the class representatives. The objectors and the class are not adversaries— rather, BCBSMT is the adversary of both. It is unfortunately emblematic of this case, however, that the class consistently deemed objectors to be the adversaries. The Dissent in its analysis perpetuates this mindset.

Id. at *23-24, 28.

Justice Morris dissented, joined by Chief Justice McGrath and Justice Baker.  Here is the heart of the dissent:

The Court disregards the evidence of collusion standard normally required to trigger a discovery request by an objecting party to a class action settlement. Lobatz v. U.S. West Cellular of Cal., Inc., 222 F.3d 1142, 1148 (9th Cir. 2000). The Court instead authorizes objectors to undertake an open-ended inquiry of the motives and actions of the settlement parties that fails entirely to take into account the apparent fairness of the proposed settlement. I fear that this departure strikes a fatal blow for class-action litigation in Montana as litigants will shy away from settlements that objectors can challenge, and with little or no cause, subject the settlement parties to unprecedented invasions into the details of the agreement.

. . .

The Court reasons that the requirement for an objector to demonstrate evidence of collusion from other sources "begs the question of just how such evidence could be obtained in a closed proceeding." Opinion, ¶ 34. I am aware of no cases, however, in which the settlement negotiations have been open to all comers. Nothing in Lobatz indicates anything other than a closed proceeding produced the settlement. Lobatz, 222 F.3d at 1148. The same holds true for the settlement negotiations in Mars Steel, 834 F.2d at 681, and Hanlon, 150 F.3d at 1018. The Manual for Complex Litigation, Fourth, § 21.643, similarly provides that a court "should not allow discovery into the settlement negotiation process unless the objector makes a preliminary showing of collusion or other improper behavior." The Court seemingly disregards this evidence of collusion requirement in favor of some open-ended discovery requirement regardless of the appearance of an objectively fair settlement.

The Court's open-ended discovery requirement whenever an objector raises directly or implicitly a claim of collusion will likely have a chilling effect on future class action cases. The objectors' newly propounded right to discovery infringes upon the confidentiality that accompanies settlement negotiations and mediations. Section 26-1-813(3), MCA. Confidentiality fosters honest communication between parties, and in turn, this honest communication effectuates settlement. M. R. Evid. 408, Commission Comments. The Court's newly propounded rule strips the ability of parties to a class action to protect such confidential communication. This potential public scrutiny likely will lead class-action parties to be less forthcoming in negotiations, and in turn, leave the parties less likely to settle their dispute. This outcome conflicts with Montana's public policy of promoting settlements.

Id. at *30-31, 47-48 (Morris, J., dissenting).

As the dissent notes, this decision seems contrary to the weight of authority regarding objectors’ ability to take discovery into class action settlements.  It will be interesting to see whether this decision is followed elsewhere.  One approach that parties to class action settlement discussions may wish to consider is to assume that their discussions might not be confidential and conduct themselves accordingly.

Declaratory Relief Class Actions Under Rule 23(b)(2): Sixth Circuit Issues Significant Opinion in Health Insurance Class Action

Posted on February 21, 2012 by Wystan M. Ackerman

The Sixth Circuit recently ruled in a health insurance case that a claim for a declaratory judgment regarding insurance contract interpretation could be certified under Rule 23(b)(2) under Wal-Mart v. Dukes, even if the declaratory relief would be a predicate to monetary relief, under which certification was sought under Rule 23(b)(3) but not yet ruled upon.  This decision is significant for insurers faced with opposing class certification under Rule 23(b)(2).

Gooch v. Life Investors Insurance Company of America, Nos. 10-5003/5723, 2012 U.S. App. LEXIS 2643 (6th Cir. Feb. 10, 2012) is a class action brought under a cancer insurance policy.  The plaintiff contends that the policy requires payment of the full “list prices” on medical bills, rather than the lower prices that are accepted as full payment by the medical providers (the idea seems to be that the insureds would get to pocket the difference).  The Sixth Circuit’s opinion is lengthy and involves a number of issues.  The court rules that a nationwide class action settlement by the defendant in Arkansas was binding and prevented the plaintiff from seeking certification of a class that overlapped with the class in the Arkansas case, but did not prevent the plaintiff from seeking certification of a class that did not overlap with the class in the Arkansas case (e.g., a different time period or a potential class of opt-outs). 

What I found most significant was the court’s ruling that class certification was appropriate on a declaratory relief claim under Rule 23(b)(2) on an issue of insurance contract interpretation.  The court wrote as follows:

[Plaintiff] requested that the district court certify a "Declaratory Relief Class . . . pursuant to Rule 23(b)(2) . . . and, at such time as the Court deems proper, then certify the Restitution/Monetary Relief Sub-Class as a class action pursuant to Rule 23(b)(3)." R. 1 (Compl., Prayer for Relief A) (emphasis added). He explicitly asked the court to enter a declaratory judgment separate from the request for restitution and monetary damages, which would be the subject of a distinct sub-class certified under a different subsection of Rule 23.[15] Id. at Prayer for Relief B, C; see also id. ¶¶ 71, 88. He did not "combine any claim for individualized relief with [his] classwide injunction." Wal-Mart, 131 S. Ct. at 2558. The point is not simply that declaratory relief predominates over monetary relief or that monetary relief is incidental to declaratory relief. It is that, in this case, declaratory relief is a separable and distinct type of relief that will resolve an issue common to all class members.

Not every class member will have a claim for damages because some presumably did not make a claim for payment after the May 2006 policy clarification. Still, the declaratory judgment will apply to a uniform interpretation of a contract that governs or governed each class member, making Rule 23(b)(2) certification appropriate. "All of the class members need not be aggrieved by . . . [the] defendant's conduct in order for some of them to seek relief under Rule 23(b)(2). What is necessary is that the challenged conduct or lack of conduct be premised on a ground that is applicable to the entire class." 7AA Wright & Miller, supra, § 1775. "It is sufficient if class members complain of a pattern or practice that is generally applicable to the class as a whole. Even if some class members have not been injured by the challenged practice, a class may nevertheless be appropriate." Walters v. Reno, 145 F.3d 1032, 1047 (9th Cir. 1998). "The key to the (b)(2) class is `the indivisible nature of the injunctive or declaratory remedy warranted—the notion that the conduct is such that it can be enjoined or declared unlawful only as to all of the class members or to none of them.'" Wal-Mart, 131 S. Ct. at 2557 (quoting Nagareda, 84 N.Y.U. L. Rev. at 132). Because Life Investors interprets the phrase "actual charges" the same way for each policyholder, uniform declaratory relief is appropriate.

This point also disposes of Life Investors's contention that the district court's "piecemeal certification" of a single count of Gooch's complaint "does not materially advance the litigation." Appellant 10-5723 Br. at 53.[16] We find nothing objectionable about the district court certifying one count of Gooch's complaint, an approach that we have affirmed in the past. See Beattie, 511 F.3d at 568. In sum, certifying declaratory relief under Rule 23(b)(2) is permissible even when the declaratory relief serves as a predicate for later monetary relief, which would be certified under Rule 23(b)(3).

Id. at *56-59.  The court also noted in a footnote that it did not view claim splitting as a problem for piecemeal certification in this case.  Id. at *59 n.16.  The court does not really address whether certification under Rule 23(b)(2) would remain proper if the district court concludes that a (b)(3) class for damages is improper, an issue not yet addressed by the district court.  The district court ruling was vacated and remanded for further proceedings.

This decision seems somewhat inconsistent, for example, with the Seventh Circuit’s opinion last year in Kartman v. State Farm Mut. Auto. Ins. Co., 634 F.3d 883 (7th Cir. 2011) (blog post), in which the Seventh Circuit explained that “Rule 23(b)(2) governs class claims for final injunctive or declaratory relief and is not appropriately invoked for adjudicating common issues in an action for damages,” which seems to be how declaratory relief is sought to be used in Gooch.  Id. at 895.

I expect this decision could lead to more attempts by policyholders to seek certification of Rule 23(b)(2) classes for declaratory relief against insurance companies on issues of contract interpretation.  Stay tuned.

Montana Class Action Decision Illustrates Some State Courts' Divergence From Wal-Mart

Posted on January 16, 2012 by Wystan M. Ackerman

The Montana Supreme Court’s recent decision in Diaz v. Blue Cross and Blue Shield of Montana, 2011 Mont. LEXIS 433 (Mont. Dec. 21, 2011) is an interesting example of how some state supreme courts are effectively ignoring or side-stepping the U.S. Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).  I have not seen any state supreme court squarely take on the Wal-Mart opinion and and reject it, but some courts seem to be simply ignoring Wal-Mart.  This case is a good example of that.

Diaz involved a healthcare benefit plan for state employees.  The claim was that persons injured in auto accidents were entitled to essentially be paid twice for medical expenses – both by the tortfeasor’s insurer and by the state employee healthcare plan.  The contention was that the state healthcare plan was not entitled to subrogation rights against the tortfeasor’s insurer under the “made whole doctrine” as applied in Montana.

The Montana Supreme Court held that certain statutes were not applicable to the third-party administrators sued in the case, but that the trial court had abused its discretion in denying class certification.  While the court noted that it had previously relied on federal authority on class certification, and noted Wal-Mart’s holding on certification of Rule 23(b)(2) classes, the court simply ignored what Wal-Mart had to say about commonality and consideration of the merits at the class certification stage.  The court explained that commonality was not a stringent threshold and that “[a]ll that is necessary . . . is an allegation of a standardized, uniform course of conduct by defendants affecting plaintiffs.”  Diaz, at *16.  This was a quote from a 2005 federal district court opinion that had been quoted in a later Montana Supreme Court decision.  It is plainly inconsistent with Wal-Mart’s holding that commonality requires a common issue that is one where “determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.”  Wal-Mart, 131 S. Ct. at 2551. The trial court in Diaz seemed to be applying that type of standard, focusing on whether individual determinations would be needed on each claim.  The state supreme court majority, however, found it sufficient that there was a common issue of whether the state was improperly exercising subrogation rights without first making a “made whole” determination.  Whether that was an issue that would satisfy Wal-Mart’s commonality test is unaddressed.

The Montana Supreme Court went on to conclude that the trial court, “in determining that individualized made-whole determinations were necessary here, erroneously delved into the merits of [the plaintiffs’] claims.”  Diaz, at *25.  Again, this seems inconsistent with Wal-Mart’s instruction that “[f]requently th[e] rigorous analysis [required for class certification] will entail some overlap with the merits of the plaintiff’s underlying claim.  That cannot be helped.”  Wal-Mart, 131 S. Ct. at 2551.  The Montana Supreme Court’s conclusion on this point also seems  inconsistent with the basic nature of a class certification determination.  If the trial court cannot decide whether an individual determination is required on each claim, how can it properly decide class certification?

The court also seems to reject or side-step Wal-Mart’s unanimous holding on Rule 23(b)(2).  The opinion is unclear on this point, but it seems to ignore the fact that damages would have to be individualized, and the injunctive or declaratory relief purportedly sought (returning money until fact-specific determinations were made) would be a temporary step towards an individualized determination.

There is a strong dissent by Justice Rice beginning with the statement that “I believe the Court has become so lost in the forest that it cannot see the controlling legal principles for all the trees.”  Diaz, at *32 (Rice, J., dissenting).  The dissent focuses on the prior history of the case, which included a prior appeal to the state supreme court.  Justice Rice suggests essentially that the majority had transformed the nature of the plaintiff’s claims and “re-made” the case into a different one than the case the trial court had decided. 

There is nothing inherently wrong with a state supreme court disagreeing with the U.S. Supreme Court on class certification issues, if it is consistent with due process.  But if a state supreme court is going to do so, particularly where the state rule is identical to the federal rule and the state court has followed or adopted federal law, in my view the state court should explain its departure from the U.S. Supreme Court.  It should address Wal-Mart on its merits and reach a reasoned conclusion, not ignore Wal-Mart or side-step it.  Only a rigorous analysis by state supreme and appellate courts will further the development of class action law.

Superiority Requirement for Class Certification: New Sixth Circuit Decision Makes Interesting Points

Posted on August 23, 2011 by Wystan M. Ackerman

The recent Sixth Circuit decision in Pipefitters Local 636 Insurance Fund v. Blue Cross Blue Shield of Michigan, 2011 U.S. App. LEXIS 16624 (6th Cir. Aug. 12, 2011) makes some interesting points about superiority that I think are particularly significant, and have not seen in other class action decisions. 

The case involved whether certain fees imposed by Blue Cross Blue Shield of Michigan on an employee union’s insurance fund were authorized by Michigan law and whether there was an improper failure to disclose these fees.  See id. at *2-4.  The district court ruled on summary judgment motions that collecting the fees at issue was contrary to Michigan law, and then granted class certification.  Id. at *16-21. 

The Sixth Circuit reversed the class certification on several grounds, but what I found most interesting were two points the court made about commonality: 

  1. The court explained that, because the district court had already decided the central legal issues, a class action was not the superior method of resolution -- “it would have been more judicially efficient to enter a final judgment in the individual action so as to allow BCBSM to file an appeal.  In this way, the central legal issue could have been resolved by this court, and based on that outcome, other potential class members could then decide whether to pursue an individual suit . . . .”  Id. at *18.  This rationale applies in many insurance class actions, where all that is really needed is a final appellate resolution of a central issue of coverage or statutory interpretation, and then the decision can be applied to individual cases.  A class action may not be the superior method of getting the issue resolved. 
  2. The court gave significant weight to an amicus brief filed by the Michigan insurance commissioner in support of the insurer’s position.  The amicus brief explained that the fees at issue helped fund coverage for senior citizens under a Medigap program, and thus a class action could lead to higher premiums or reduced coverage for seniors.  The court wrote that “[t]he serious financial repercussions to Michigan’s elderly population further support a conclusion that a class action is not a superior method of resolving the Fund’s allegation,” and thus “[t]he public’s interest would also be better served by allowing the individual suit . . . to proceed to this court for appellate review.”  Id. at *32.  I rarely see these kinds of public interest arguments made in insurance class actions.  This one clearly caught the court’s attention, although it’s rare that the insurance commissioner will weigh in with an amicus brief.  But this is something that is certainly worth giving serious thought to in appropriate cases.  In many instances the certification of an insurance class action will benefit a relatively small group of insureds and the plaintiffs’ lawyers but potentially to the detriment of the rest of the company’s insureds.

 

Certification of Class Against CIGNA by Pennsylvania Federal Court Illustrates Where Insurance Companies May Have Class Action Exposure Post-Wal-Mart

Posted on August 17, 2011 by Wystan M. Ackerman

A recent certification of a class against CIGNA in the Eastern District of Pennsylvania is a good example of the type of issue on which insurers may continue to have significant class action exposure following the Supreme Court’s decision in Wal-Mart (see my blog post on Wal-Mart).  This decision has received fairly extensive coverage in the media and blogs, including on Insurance Networking News and Insurance Dispatch. 

In Churchill v. CIGNA Corp., 2011 U.S. Dist. LEXIS 90716 (E.D. Pa. Aug. 12, 2011), the plaintiff alleged that CIGNA improperly denied claims seeking certain types of treatment for autism known as Applied Behavior Analysis and Early Intensive Behavioral Treatment (collectively “ABA”).  The claims were denied under an exclusion for “experimental or investigative” treatment, and CIGNA apparently had a policy of universally denying all such claims on this basis.  Id. at *2.

The court found that the new commonality requirement articulated in Wal-Mart was satisfied because, in contrast to the discretion that Wal-Mart gave store managers over employment decisions, “Cigna indisputably has a national policy of denying coverage for ABA to treat ASD” and “the central question here is whether Cigna’s denial of medical coverage for ABA as a treatment for ASD on the basis that such treatment is investigative or experimental was proper, and the answer to this question will resolve each class member’s individual claim.”  Id. at *12-13.  The court also found that predominance was satisfied because there was no evidence that the policy of denying these claims was any different for any of the ERISA plans managed by CIGNA.  Rather, “Cigna made a class-wide determination that ABA was experimental in all cases.  The propriety of this determination – specifically, whether it violates ERISA – can easily be litigated in a single forum.”  Id. at *22.  The court did not really address some of the individual issues I could see arising in this kind of case, such as whether, assuming the treatment was not “experimental or investigative,” it would be appropriate for particular children based on their condition.

Notably, the court distinguished a Tennessee federal court decision, Graddy v. Blue Cross blue Shield of Tenn., 2010 WL 670081 (E.D. Tenn. Feb. 19, 2010), in which the court found that individualized assessments as to the appropriateness of treatment would be required, and the insurer apparently did not have any across-the-board, universal policy.

The key takeaway I see here is that when an insurer adopts a bright-line rule requiring denial of all claims of a particular type, without any exceptions and without any individualized assessment, while that might in some instances make business sense, that type of policy or practice can in some cases increase the insurer’s class action exposure.  Where some discretion is given to front-line personnel and individual, fact-based determinations are made, there is less chance a class action being certified.

Insureds Paying Premiums for No Coverage? Health Insurance Class Action Against Aflac Where Premium Was Charged For Over-age Dependant

Posted on May 20, 2011 by Wystan M. Ackerman

Insurers that issue coverage only for insureds within certain age brackets should review their procedures with respect to whether they might be charging premiums for insureds that are not entitled to coverage under the terms of the policy.  One example of this is where health insurance companies issue policies that allow coverage for dependants only under a certain age.  There are other types of insurance, such as certain kinds of life insurance, that also sometimes have age cutoffs.  Some homeowners’ policies limit coverage for personal property of students who are dependants of the named insureds to a certain maximum age, but that may not have any impact on premiums charged.

In Guschausky v. American Family Life Assurance Company, a putative class action pending in Montana federal court against Aflac, the plaintiff purchased health insurance covering her son through age 23 as long as he was a full-time student.  The son received medical treatment after turning 24 and the claim was denied because he was over 23.  The plaintiff sued for a refund of the premium paid for her son’s coverage, and filed the suit as a putative class action.

The Montana federal court denied the motion to dismiss, concluding that: (1) Aflac’s offer to refund the plaintiff’s premium could not render the case moot, citing case law on “picking off” named plaintiffs; (2) the issue of ERISA preemption could not be decided on the pleadings; and (3) the unjust enrichment claim was not barred by the existence of a written contract because “the policy does not govern the premiums [plaintiff] paid to Aflac for which she allegedly received no benefit in return.”

It is unclear from the opinion whether this was a circumstance where the policy was renewed after the son turned 24, or if the son turned 24 during the policy year but the premium for his coverage was not pro-rated for that year.  It’s almost impossible for an insurer’s procedures to be perfect on this type of issue because the insurer might not have a date of birth for every dependant on every policy, or the date of birth might have been entered incorrectly.  Prorating coverage for the last year of the insured’s eligibility also may be administratively challenging.  But charging premiums for no coverage is something the plaintiffs’ class action bar can seize upon, and is an area that insurers should review carefully.