John L. Watkins

Abstract

Application of the Erie doctrine requires that federal courts exercising diversity jurisdiction apply substantive state law consistent with the state’s highest court as a matter of federalism and to discourage forum shopping. This Article analyzes the reality, however, that federal courts decide important unsettled questions of state law differently than state courts, which undermines these two fundamental underpinnings of the Erie doctrine. Further, this Article demonstrates, through various examples, how these incorrect “Erie guesses” can have profound practical implications in the insurance context due to the standard use of form contracts for drafting insurance policies. As a result, litigants battle fiercely over the judicial forum, as federal courts are perceived, particularly by insurers, to decide procedural and substantive issues of state law differently than state courts. Considering that the abolishment of diversity jurisdiction is highly improbable, this Article argues that federal courts should adopt clear, uniform standards that favor the liberal use of certification of unsettled questions of state law to the state’s highest court. A constitutionally consistent approach to certification would promote the principles of federalism that underlie the Erie doctrine and would render moot the less productive question of why federal courts decide the issues differently.

Christine H. Monahan

Abstract

This Article documents how, contrary to popular narratives, the states were given and took advantage of numerous opportunities to weigh in on health insurance exchange implementation under the Affordable Care Act. This engagement was driven by frequent informal consultation with federal officials, although states were also regular participants in regular notice-and-comment rulemaking. This Article identifies four factors that appear to have affected how much influence states were able to exercise over federal decision-making, and concludes by discussing how changing dynamics may encourage states to push for a more formal seat at the table in future exchange policy deliberations.

Gregory J. Chase

Abstract

Insurance and adoption seem like two ideas that can co-exist and mingle with one another. Yet, how have only a few people even ever heard of the term adoption insurance? Adoption is a market that seems fairly constant as there will always be a sizeable number of Americans interested in going through the process. There also seems to be little risk, especially since adoption disruption for domestic adoptions in the United States occurs at very low rates. So where did the miscommunication occur when adoption insurance finally was created? Who is to blame for the failure of the pioneered adoption disruption insurance? Is it possible to see adoption disruption insurance, like the one created by Philadelphia Insurance Company, in the United States any time soon? Well, most people might think adoption and insurance are two words that do not fit together. Not surprisingly, the two have only recently overlapped. The Omnibus Budget Reconciliation Act of 1993 (OBRA-93) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA), for example, were created with provisions that allowed adopted children to be insured under the adopting parents’ health insurance. These laws mandated health insurance companies that already provided employer-sponsored plans covering dependent children to include adopted children in those policies as if they were no different than biological children. But these laws seem to be the extent of how much the two words will ever overlap. One might think that the low rates of adoption disruption in America combined with the sometimes unbearable costs to adopt would bring about an avenue for insurance companies to mold a viable adoption disruption policy. But these two factors only describe a small portion of the considerations involved in pursuing adoption. One major factor is privacy. Insurance companies, like Philadelphia Insurance, might contend that overlooking the privacy factor proved fatal to their attempt to create an adoption disruption policy. Privacy remains crucial partly because a few high-profile adoption terminations brought about significant public disapproval for the families who terminated their adoptions. Thus, potential adopting parents are less willing to tell insurance companies—or anyone—that their adoption fell through because of them. Currently, former adoption disruption policies are mostly unknown to the public, as many individuals, adopting parents and non-adopting persons alike, do not know such policies ever existed. It seems that, based on insurance companies’ last attempt to generate interest in the policy, adoption disruption insurance will continue to be viewed as a myth for years to come.

John G. Day

Jessica L. Roberts

Abstract

If asked what was the central issue in Burwell v. Hobby Lobby, most informed Americans would likely reply that it was the conflict of reproductive health and religious freedom. This Essay, however, argues for an alternate reading of that now infamous case. It proposes that Hobby Lobby is best understood as a demonstration of how the continued reliance on employer-provided benefits renders employers de facto health-care policy makers with the ability to profoundly impact the health-care access of millions of Americans.

Srishti Miglani

Tom Baker, Eric Helland, & Jonathan Klick

Abstract

Recent work using Texas closed claim data finds that physicians are rarely required to use personal assets in medical malpractice settlements even when plaintiffs secure judgments above the physician’s insurance limits. In equilibrium, this should lead physicians to purchase less insurance. Qualitative research on the behavior of plaintiffs suggests that there is a norm under which plaintiffs agree not to pursue personal assets as long as defendants are not grossly underinsured. This norm operates as a soft constraint on physicians. All other things equal, while physicians want to lower their coverage, they do not want to violate the norm and trigger an attack on their personal assets. This constraint should be less effective when physicians have other ways to shield their assets, such as through large personal bankruptcy exemptions like those available in Texas. Settlement data from the National Practitioner Data Bank indicate that settlements in Texas are abnormally low, just as they are in other jurisdictions with unlimited homestead exemptions in bankruptcy. Consistent with theory, we find that more generous exemptions are also associated with lower insurance prices and lower levels of insurance coverage. These results suggest that the large “haircuts” and low insurance limits observed in the Texas data may be driven by Texas’s generous bankruptcy provisions. At a minimum, Texas is not generally representative of other jurisdictions, which weakens the case for extrapolating conclusions from Texas data to other jurisdictions.

John A. Turner

Abstract

A growing literature has documented the low quality of financial advice that many people receive because of conflicts of interest that many financial advisers have. The Council of Economic Advisers has found that bad advice from financial advisers concerning rollovers from 401(k) plans to IRAs costs U.S. workers $17 billion a year. When a similar situation occurred in the United Kingdom, the situation was termed the “pension mis-selling scandal.” British financial market regulators levied billions of pounds in fines on financial service providers to compensate pension participants for the bad advice they had received. This paper argues that a pension mis-selling scandal is occurring in the United States. Despite the fiduciary duty of financial advisers, and the task of the SEC to enforce that fiduciary responsibility, the SEC has taken no action to protect pension participants relating to advice to roll funds over from low-fee 401(k) plans to IRAs, which generally charge higher fees. Even in the case of advice to roll funds over from the extremely low-fee Thrift Savings Plan for federal government workers (which charges less than 3 basis points), the SEC has taken no action. This paper compares the pension mis-selling scandal in the United Kingdom to the situation in the United States concerning pension rollovers to IRAs. The paper then compares the regulatory response of financial market regulators in the United Kingdom to that of the SEC. The main findings of this paper are the apparent view of the SEC that fees in the context of pension rollovers are not an important issue, and the related finding that there has been a lack of action by the SEC concerning pension mis-selling in the United States. These findings are both consistent with the hypothesis of regulatory capture of the SEC. Because the fiduciary standard of the SEC is weak, extending it to broker-dealers will have limited effect.

Kathryn L. Moore

Maria O’Brien Hylton

Abstract

In its recent Harris v. Quinn opinion, the U.S. Supreme Court (in particular Justice Alito) seemed to welcome a future opportunity to reconsider the 1977 landmark Abood decision in which public sector closed shop employees were not required to join a union but could be subject to fees that cover the costs of “collective bargaining, contract administration, and grievance adjustment purposes.” Supporters of the Abood approach argue that it is a reasonable compromise that prevents non-members from free riding on the union’s efforts (i.e., enjoying the wages and benefits negotiated by the union without sharing the costs incurred). Detractors and the plaintiffs in Friedrichs argue that free riding concerns are insufficient to overcome serious First Amendment objections. The central idea is that all bargaining in the public sector is inherently political. Public sector pay, tenure, and benefits (especially expensive retiree health care and pension promises), it is claimed, now profoundly affect the ability of state and local governments to function in many jurisdictions. This article briefly reviews the major claim in Friedrichs—that public sector agency agreements violate the First Amendment—and considers the implications of a decision that, but for Justice Scalia’s unexpected death, almost certainly would have overturned Abood. What would this mean for financially strapped state and local governments? To understand what a victory for the Friedrichs plaintiffs would mean, this paper looks at recent data from Wisconsin, which dramatically constrained public sector agency agreements a few years ago and has seen public union membership, union revenue, and political power plunge as a result. If Friedrichs had overturned Abood during the 2016 term, we would now expect to see national patterns similar to those observed in Wisconsin. In many places around the country, a drop in public sector union political power would be expected to translate into a climate more supportive of reduced future expenditures on public pensions and health care.