STOPLOSS INSIGHTS
f/k/a/ “Musings on….”

A good friend suggested to me recently that my Musings series was too informally titled. Being the stilted, always professional, humorless person that I am, I changed it up. So, here is the inaugural edition of Insights, for whatever it’s worth.
California Pregnancy Disability Leave Act (“CPDLA”)
Cal. Govt. Code §12945.2 makes it unlawful for a covered employer (50+ employees) to fail to grant leave to a pregnant female employee for a period less than 12 workweeks and to provide other special accommodations. This operates on California employers, and trumps any eligibility requirements in the Plan Document.
Almost routinely after a stop loss claim is denied for a group employing such an individual, the carrier hears from the broker, the TPA and/or the group complaining the usual refrain: “the Plan paid, so therefore you should too.” No matter. The CPDLA operates on and regulates only employers, not stop loss carriers.
So what? say the complainers. “You have this Conformity with Law provision in your policy, and the CPDLA is the law in California, so conform to it.” Not quite so fast. Such provisions are typically worded as follows:

CONFORMITY WITH LAW
If any provision of this policy is contrary to any law to which it is subject [emphasis added], such provision is hereby amended to conform to the minimum requirements of such law.

Unless the policy has a California choice of law provision in it, the Conformity provision does not somehow import the CPDLA into the policy. Now, some stop loss policies have a default choice of law provision, making the home office of the insured group determinative of what law applies. In the case of a California-based group, the carrier has bought the farm in most cases. Presumably, however, the underwriters are well-aware of the CPDLA, and problems like these are avoided.

Enrollment
The employee forgets to enroll a newborn within the time allotted under the terms of Plan. Regardless, the employer covers him anyway. The stop loss carrier balks on eligibility grounds. Complicating matters is a policy provision that no one can explain. It goes something like this:
Newborn children of plan participants who have previously enrolled and continue to cover their eligible dependents under the Employee Benefit Plan will be eligible under the Policy on the date of the
child’s birth.
I have had this puzzling situation come up more than once. What is the purpose of a provision like this? How does it benefit the carrier? It’s just THERE.
Well, in the first place, the stop loss policy doesn’t cover newborns, children, teens or adults. It covers the group, not any of it’s employees or their dependents. This is why individuals can’t sue the stop loss carrier directly; there is no privity of contract. Does this newborn provision waive that and operate to insure the untimely enrolled babies? Highly doubtful this ever crossed anyone’s mind.
Turns out that, in both cases, the newborn provision is basically a virus, replicated over and over again with each re-filing, borrowed from language used in casualty policies in the early 70s, it’s still THERE in some cases. Moral: look for viral hangovers like this and eliminate them. They are nothing but trouble.

Put it in Writing?
Clients pay lawyers a lot of money to formalize settlement agreements. Lots of money. But, while almost always the more prudent course, this is not always necessary. In one case I recently settled, we did it on a bare bones agreement reached at mediation, as modified by a couple of emails between counsel and a dismissal of the case. Voila!
__________________
“The capacities by which we can gain insights into higher worlds lie dormant within each one of us.”– Rudolph Steiner



  • Thomas A. Croft, Croft Law LLC


  • 404-247-8181


  • tac@xsloss.com

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