By: Shernoff Bidart Echeverria LLP
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Representative Landmark Cases for Ricardo Echeverria
California’s Unfair Business Practices Law Is Applied to the Insurance Industry: Earthquake Claimants v. Homeowners Carrier (Allegro)
THE LAW FIRM of Shernoff Bidart Echeverria set legal precedent on behalf of victims of the 1994 Northridge earthquake when it was established for the first time that California’s Unfair Business Practices Act can be applied to the insurance industry. At issue was the insurance company’s failure to notify policyholders of a reduction in coverage it implemented in 1985. Prior to that year, policyholders paid a premium for earthquake coverage in the form of a policy rider. But in 1985 the company began offering earthquake coverage through a separate policy – without the knowledge or approval of its policyholders. Attorneys Michael Bidart and William Shernoff recognized that this behavior constituted not only multiple breaches of good faith but also a violation of California’s Unfair Business Practices Act. They wanted to hold the insurer accountable for its unfair business practices. The Superior Court handed down a decision, subsequently upheld by the California Appellate Court, proclaiming that California’s unfair business practices law indeed could be applied to insurance companies. The ruling brought the insurance company in this case to the bargaining table. Bidart was able to gain for all claimants of the lawsuit full restitution for damages they incurred from the Northridge earthquake. The settlement, which was confidential, was nonetheless reported by the Los Angeles Times as reaching approximately $100 million.
The Quake that Shook Allstate: Sherman v. Allstate
AT 4:30 AM ON January 17, 1994, a 6.7-magnitude earthquake rocked Southern California, collapsing buildings, severing freeway interchanges and rupturing gas lines. Fifty-seven people died, more than 9,000 were injured and more than 20,000 were displaced from their homes. The earthquake, named for its epicenter in the town of Northridge, proved to be the costliest in US history, causing estimated losses of $20 billion. Many of those who suffered losses turned to the law firm of Shernoff Bidart Echeverria LLP when their claims were not handled fairly. Shernoff Bidart Echeverria filed a class-action lawsuit against Allstate Insurance Company alleging that the company was involved in a widespread scheme, in which adjusters had altered engineering reports and construction estimates, to minimize claimants’ damages. The case settled upon an agreement by Allstate to provide an independent re-evaluation of engineering reports and construction estimates and to notify an additional 12,000 policyholders of their potential claims. In the end, Allstate re-evaluated the claims of over 2,300 policyholders and made fair and total payment to them. In the case, lead counsel William Shernoff and Michael Bidart were able to effect a monumental settlement that also served as a warning to the entire insurance industry about the perils of mistreating policyholders in their time of need.
Beware of Trading Medicare for HMO Coverage
A 68-YEAR-OLD MAN assigned his Medicare benefits to an HMO in return for coverage to match or exceed his minimum Medicare benefits. Among the promised benefits were 100% payment of comprehensive inpatient and outpatient rehabilitation services. Six months later, the man broke his hip in a fall. After surgery, he suffered serious complications, including two major heart attacks, pneumonia and a large blood clot in his leg. When he was finally moved out of the intensive care unit, he was still unable to walk or stand. He required extensive rehabilitation, so he was transferred to a rehabilitation facility, where he began a physical therapy program. The HMO questioned the man’s ability to participate in the program and mandated that he be admitted instead to a nursing home, which was less expensive and had no rehabilitation program. The man’s physicians maintained that he needed physical therapy, after which he would be able to walk normally again. The HMO turned a deaf ear, refusing to pay for physical therapy on the grounds that it was medically unnecessary. At this point, attorney Michael Bidart initiated legal action against the HMO. The unanimous support of all three of the man’s doctors—his personal physician, his hospital physician and his hospital psychiatrist – made Bidart’s case exceedingly strong. Moreover, the physical therapy services the man’s doctors recommended were clearly within Medicare guidelines and had been overruled by HMO representatives only because they were getting paid to say no. Three years after filing suit, the man received a multimillion-dollar settlement from the HMO. Fortunately, while waiting for the lawsuit to be settled, he was able to continue physical therapy with the help of a charitable foundation, and he eventually made a full recovery.