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Michigan Court of Appeals Holds Insured Not Covered Under Title Policy for Damages Caused by Disclaimed Easement Banner Image

Michigan Court of Appeals Holds Insured Not Covered Under Title Policy for Damages Caused by Disclaimed Easement

Month: June 2020

Michigan Court of Appeals Holds Insured Not Covered Under Title Policy for Damages Caused by Disclaimed Easement

Posted on by rd_admin

The Michigan Court of Appeals recently held that insured homeowners did not have coverage under their title insurance policy for an easement permitting city sewer pipes across the property, based in part in the city’s later disclaimer of the easement.  See Harris v. Fid. Nat’l Title Ins. Co., 2020 WL 969208 (Mich. Ct. App. 2020).  In 1956, plaintiffs’ predecessor-in-interest granted the city an easement for storm and sanitation sewers.  As part of the agreement, the City agreed that it “shall and will do as little damage to the said land and premises as possible.”  In 1961, the city disclaimed its rights to this easement, and in 1985 plaintiffs purchased the property and defendant issued a title insurance policy.  In 2013, plaintiffs began having issues with their home, including “heaving of the garage floor, cracks in the basement drywall, and water damage in the basement,” that they eventually concluded was caused by the city’s pipes.  Plaintiffs then submitted a claim to defendant, claiming that the easement constituted a “defect in or lien or encumbrance on such title” or resulted in the “unmarketability of such title.”  Defendant denied the claim, and plaintiff brought this action.  The trial court granted defendant’s motion for summary judgment, and plaintiffs appealed.

On appeal, the Court affirmed the decision.  The Court found that the 1961 disclaimer “is clear evidence of the City’s intent to release its right to the easement, thereby returning an unencumbered interest to plaintiffs’ predecessors in interest by way of abandonment.”  The Court further found that, even if the City had continued using the pipes despite this disclaimer, as alleged by plaintiffs, this continued use would be “prescriptive, and thus not covered under the policy.”  Accordingly, the Court affirmed the dismissal of the action against defendant.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Anthony Lombardo at alombardo@riker.com.

Ninth Circuit Holds Loan to Trustee for Benefit of Beneficiary May Be Subject to TILA and RESPA

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The United States Court of Appeals for the Ninth Circuit recently held that a loan to a trustee that was used to repair the trust beneficiary’s home could be a consumer credit transaction subject to TILA and RESPA.  See Gilliam, Tr. of Lou Easter Ross Revocable Tr. v. Levine , Tr. of Joel Sherman Revocable Tr., 955 F.3d 1117 (9th Cir. 2020).  In the case, the borrower was the trustee of a trust created by her sister and for the benefit of her niece.  The trustee took out a loan to make repairs on the niece’s home.  She later brought this action alleging that the loan disclosures misrepresented the payment schedule on the loan, and that the defendant lender therefore violated TILA and RESPA.  Defendant moved to dismiss, arguing that this was a commercial transaction with a trust and not a “consumer credit transaction” subject to RESPA and TILA.  The District Court agreed and dismissed the action.

On appeal, the Court reversed the dismissal.  The Court found that the Commentary to Regulation Z requires courts to look at the substance of a loan to a trust to determine whether the loan was “obtained for a consumer purpose.”  The Commentary further states that, with regard to a loan to a trust, “[r]egardless of the capacity or capacities in which the loan documents are executed, assuming the transaction is primarily for personal, family, or household purposes, the transaction is subject to the regulation because in substance (if not form) consumer credit is being extended.”  See 12 C.F.R. § 1026.3 Comment 3(a)-10.i.  Thus, the Court found that it did not matter whether the loan proceeds were used by the borrower herself or for the beneficiary, and that this action could proceed.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Anthony Lombardo at alombardo@riker.com.

New Jersey Considers Delaying Assessment for Ambulatory Surgery Centers and CDC Issues Guidance on Antibody Testing

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New Jersey and the Federal Government continue to revise statutes and regulations to address COVID-19. Our updates continue to focus on these revisions. For example, New Jersey is currently considering a law that delays, for nine months, the assessment that Ambulatory Surgery Centers must pay by June 15. Any Center, however, should not wait until June 15 to determine if the law passes. Call the Department of Health and ask for an extension to pay the assessment.

For more information about this blog post, please contact Khaled J. Klele, Ryan M. Magee, or Labinot Alexander Berlajolli.

STATE UPDATE

Recent Proposed and Adopted Laws

A4201 – Proposed– This bill delays the Ambulatory Surgery Center assessment due on June 15, 2020 for nine months to be paid in full by March 15, 2021.

A3942 – Approved – This bill requires hospitals to permit a pregnant woman to have at least one individual accompany her during the period of labor and delivery in the room of the hospital where the woman gives birth.  The bill takes effect immediately and was passed, in part, because hospitals were preventing individuals from accompanying pregnant woman in delivery rooms because of COVID-19.

S2344 – Approved – This bill requires state Medicaid and NJ FamilyCare programs and insurance carriers in the State, during the public health emergency, to provide coverage for prescription drug refills, not to exceed a 120-day supply, even when the covered person has not yet reached the scheduled refill date, provided that the prescription itself would remain valid beyond the refill date.  The coverage shall be provided based on the authorization for the most recently filled prescription and additional authorization for the refill shall not be required.

OIG Report on New Jersey’s MCOs

The Office of Inspector General of the Department of Health and Human Services (“OIG”) recently issued a report on New Jersey’s failure to ensure that its managed care organizations (MCOs) properly managed long-term services and support (MLTSS) available to Medicaid beneficiaries in home and community-based settings. For 68 of the 100 monthly capitation payments in the OIG’s random sample, the OIG found that MCOs did not comply with the requirements to adequately assess and cover the associated beneficiaries' needs for long-term services and supports.  The OIG also determined that the MCOs' failures could have resulted in beneficiaries not getting the services that they needed and may have put their health and safety at risk. According to the OIG, New Jersey made monthly payments totaling approximately $386 million (federal share) to MCOs that did not comply with certain federal and State requirements.

FEDERAL UPDATE

Increased Access to Telehealth for Medicare Beneficiaries

85 FR 33796 – Final – the Centers for Medicare & Medicaid Services ("CMS") recently finalized a rule that provides better coverage and increases access to telehealth for seniors in Medicare Advantage (MA) plans.  As part of CMS’s ongoing efforts to advance telehealth, the rule provides MA plans with more flexibility to count telehealth providers in certain specialty areas, such as dermatology, psychiatry, cardiology, ophthalmology, nephrology, primary care, gynecology, endocrinology, and infectious diseases.  The rule also reduces the percentage of beneficiaries that must reside within the maximum time and distance standards in non‑urban counties from 90 percent to 85 percent.  CMS issued a fact sheet summarizing the major provisions of the final rule.   The final rule is effective August 3, 2020.

Health and Human Services Issues a Final Rule on Enforcement Discretion

85 FR 29367 – Final Rule – Health and Human Services (HHS) issued a final rule exercising its discretion in how it applies the Privacy, Security, and Breach Notification Rules under HIPAA. As a matter of enforcement discretion, HHS’s Office for Civil Rights (OCR) will not impose penalties for noncompliance with the regulatory requirements under the HIPAA Rules against covered healthcare providers or their business associates in connection with the good faith participation in the operation of a COVID-19 Community-Based Testing Site during the public health emergency. The notification of enforcement discretion was effective on April 9, 2020, and had a retroactive effect to March 13, 2020, and will remain in effect until the Secretary of HHS declares that the public health emergency no longer exists.

CMS Guidance for Reopening Nursing Homes

CMS has released recommendations for reopening nursing homes to help State and local officials determine the level of mitigation needed to prevent the transmission of COVID‑19.  Though other businesses are starting to reopen, CMS does not recommend resuming visitation in nursing homes until Phase 3 of the Guidelines for Opening Up America Again.  The CMS guidance provides states with flexibility on deciding how to implement the criteria in the guidelines, given that the COVID-19 pandemic is affecting communities differently.  States can require that, before opening, all facilities in a region meet the reopening benchmarks, or determine reopening on a building‑by‑building basis.

CMS Announced Lower Out-of-Pocket Insulin Costs

CMS has announced that it is capping out-of-pocket insulin costs for Medicare beneficiaries at $35 per month.  Over 3.3 million Medicare beneficiaries use one or more of the common forms of insulin, and CMS estimates that beneficiaries could see an average out‑of‑pocket savings of $446, or 66 percent, for their insulin.  The $35 per month cap applies to both pen and vial dosage forms for rapid‑acting, short‑acting, intermediate‑acting and long‑acting insulin.

CDC Guidance on Antibody Testing

The CDC has released Interim Guidelines for COVID-19 antibody testing.  Antibody tests help determine whether the person being tested was ever infected, even if that person was not symptomatic.  According to the guidelines, the tests should be used to help determine the proportion of a population previously infected with COVID‑19.  Test results also may assist with identifying and determining persons who may qualify to donate blood to be used to manufacture convalescent plasma as a possible treatment for people with serious cases of COVID‑19.  However, the CDC warns that serologic tests should not be used at this time to determine if an individual is immune.  A list of antibody tests authorized by the U.S. Food and Drug Administration (“FDA”) is maintained on the FDA website.

Court Rules That HHS Does Not Have to Recalculate Medicare Payments Impacted by Abandoned Rate Reduction

On May 27, 2020, the U.S. Court of Appeals for the District of Columbia Circuit affirmed a district court decision granting summary judgment to HHS on the grounds that a group of hospitals who received lower Medicare reimbursements due to an HHS “two-midnight” rule rate cut were not entitled to additional payments.  In 2014, HHS implemented a 0.2 percent rate reduction in an effort to reduce costs associated with its “two-midnight” rule.  The “two-midnight” rule states that hospital stays spanning at least “two midnights” are presumptively appropriate for reimbursement at inpatient rates.  A group of hospitals challenged the rate reduction, and, in response, the district court remanded the 2014 rule to HHS without vacating it.  HHS eventually eliminated the rate reduction and, in 2017, HHS increased the Medicare inpatient rates by 0.6 percent to offset the past effects of the previous rate reduction.  Several hospitals appealed, contending that the district court erred in failing to vacate the 2014 rule altogether or, alternatively, requiring HHS to provide additional financial reimbursement to hospitals aggrieved by the rate reduction. The D.C. Circuit disagreed, and affirmed the district court’s grant of summary judgment.   A copy of the appellate opinion can be found here.

Nevada Federal Court Holds Exclusion 3(d) Bars Post-Policy Title Insurance Claim for HOA Lien

Posted on by rd_admin

The United States District Court for the District of Nevada recently held that a lender’s claim regarding an HOA lien was not covered by its title insurance policy because the lien was recorded after the policy date.  See Deutsche Bank Nat’l Tr. Co. as Tr. for Am. Home Mortg. Inv. Tr. 2007-2 v. Fid. Nat’l Title Ins. Co., 2020 WL 1638808 (D. Nev. Apr. 2, 2020).  In the case, the homeowners purchased their property in 2006.  Plaintiff’s assignor provided the homeowners with a loan and received a deed of trust on the property, and defendant’s predecessor issued a title policy to the lender in connection with the loan.  In 2010, the HOA recorded a notice of delinquent assessment lien against the property and sold the property in 2014.  Plaintiff filed a quiet title action against the purchaser and filed a claim with defendant because the purchaser was claiming an interest in the property superior to plaintiff’s deed of trust.  Defendant denied the claim.  Plaintiff brought this action alleging breach of contract, among other claims, and defendant moved to dismiss.

The Court granted the motion to dismiss.  Exclusion 3(d) of the title insurance policy excludes coverage for loss or damage by reason of defects that attach or are created subsequent to the date of the policy.  In this case, the lien was recorded in 2010, four years after the policy date.  Citing Wells Fargo Bank, N.A. as Tr. for Option One Mortg. Loan Tr. 2007-5 Asset-Backed Certificates, Series 2007-5 v. Fid. Nat’l Ins. Co., 2019 WL 5578487 (D. Nev. Oct. 29, 2019), the Court held that the HOA’s recording of its Covenants, Conditions and Restrictions, which allowed it to file the lien, did not mean that the defect existed before the policy date, and that the defect did not exist until the HOA recorded its lien.  Likewise, the Court found that an endorsement that insures against loss or damage which the insured sustains by reason of “[c]ovenants, conditions or restrictions under which the lien of the mortgage . . . can be cut off, subordinated, or otherwise impaired” does not provide coverage.  The title defect did not occur because of the Covenants, Conditions and Restrictions, but “occurred as a function of Nevada law,” specifically the Nevada Supreme Court finding HOA liens have superiority in 2014.  Finally, the Court dismissed the remaining claims based on the fact that there is no coverage.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Anthony Lombardo at alombardo@riker.com.

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