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What would a lawyer call this?
February 8, 2013 5:33 AM   Subscribe

Is there a legal principal here, and if so, what is it called? YANML. Question about paying for a service that is impossible to benefit from. Explanation and example inside….

I am less concerned about the possibility of winning or losing an argument at some point and more interested in whether a specific legal principal or phrase describes the following example.

Example:
A person is fired from a job on June 1, XX. That person is no longer covered by the employer’s health plan. The person and the employer spend June and July (60 days) negotiating a severance package. On August 1, the fired person negotiates a severance package whereby the employer will pay 75% of the premiums for six months.

Let’s say that the settlement contract does not give specific dates as to what six month period would be covered.

The employer tells the fired employee that the premiums they paid the insurance company cover the period from June 1 to December 1 (six months.)

The fired person’s problem:

Premiums were paid for June and July on August 1. Therefore, the fired person can not benefit from the coverage because they can not go back in time.

So my question remains, is there a legal term or principal or phrase that describes not being able to exercise a right because a person could not know they had the right? (Put another way, the person’s coverage for the first two months has no value because June and July have already passed.)
posted by otto42 to Work & Money (23 answers total)
 
Not a lawyer, this isn't legal advice, but it sounds like you're talking about unjust enrichment.
posted by bfranklin at 5:41 AM on February 8, 2013


And, of course, seek out a lawyer admitted in your jurisdiction to see if you actually have a claim of unjust enrichment. The law is a nuanced thing, and wikipedia does not do nuance well simply by virtue of brevity.
posted by bfranklin at 5:45 AM on February 8, 2013


The question seems to contain a faulty premise. One does not have to make a claim on insurance to benefit from continuous coverage. Even retroactive coverage. To get COBRA from August through November, for example, premiums would have to be paid going back to the termination date in June.
posted by payoto at 5:52 AM on February 8, 2013 [2 favorites]


IAAL, IANYL, TINLA. This isn't unjust enrichment.

I don't do employment law, but I do not see what the problem is here. How has the employee been damaged? Who did he think was paying the premiums in June and July?

To really answer the question, the term or phrase is "ignorance". If you are ignorant of your rights, that is generally no one's fault but your own. The flip side is that ignorance of the law doesn't help you when you violate the law.
posted by Tanizaki at 5:57 AM on February 8, 2013


posted by Tanizaki at 5:57 AM on February 8 [mark as best answer] [+] [!]

I will try to clarify.


Who did he think was paying the premiums in June and July?


The employee did not think anyone was paying the premium for June and July and no one was paying the premium at the time.

The employer only agreed to pay for six months as part of the settlement on August 1. (Instead of paying for coverage for the next 6 months, the employer said they would cover the previous 2 months and the next 4.)

How has the employee been damaged?

This is tricky and may be specific to the type of insurance coverage.

If the employee had a medical emergency and paid for it out of pocket on July 1 for instance, eventually the employee would have been able to be reimbursed after it was discovered the premiums were paid retroactively. (On July 1, since the employee does not know the outcome of the Aug. 1 settlement, the employee may well be wondering how they are going to pay for the emergency treatment.)

On the other hand, the insurance covered a lot of services that were avoidable without insurance, but desirable to have with insurance. (ie. A non-emergency check up is a benefit that was missed because the visit would have cost $200 with no coverage but only $10 with coverage.)

I understand I am probably not being clear so I'll try to summarize.

Having insurance coverage for a date the employee can not go back to is not a benefit because the benefit can not be realized. All IMHO.
posted by otto42 at 6:43 AM on February 8, 2013


First of all, retroactive reinstatement of insurance coverage would likely allow care sought to be reimbursed by the plan. The individual could benefit from the coverage to the extent that he incurred expenses.

More specifically, perhaps if the employee could show that he would have sought health care during that period but didn't (and therefor suffered health consequences) because he thought it wouldn't be covered, that might be the beginning of an argument - in the abstract IANYL, TINLA), I could see the beginning of some sort of deterimental reliance argument, but I think it's a loser because it's not clear from the facts that the employer made any representations about coverage for June 1 - July 31.
posted by Pax at 7:05 AM on February 8, 2013


If the employee had a medical emergency and paid for it out of pocket on July 1 for instance, eventually the employee would have been able to be reimbursed after it was discovered the premiums were paid retroactively. (On July 1, since the employee does not know the outcome of the Aug. 1 settlement, the employee may well be wondering how they are going to pay for the emergency treatment.)

Is this in the U.S.? If the employee had a medical emergency a month after being fired and the severance settlement was up in the air, it would probably be in the employee's best interest to elect COBRA at that point. The employee would have to pay retroactive premiums, but wouldn't have to stress about five-figure medical bills.

On the other hand, the insurance covered a lot of services that were avoidable without insurance, but desirable to have with insurance. (ie. A non-emergency check up is a benefit that was missed because the visit would have cost $200 with no coverage but only $10 with coverage.)

A non-emergency by definition can be postponed, so it's difficult to see the argument that the employee lost out by not getting a check-up in July and instead waiting until August.

Having insurance coverage for a date the employee can not go back to is not a benefit because the benefit can not be realized. All IMHO.

Again, this depends on the terms of the insurance coverage. Continuous coverage is a thing. It is quite possible that there was no way for the employee to get this insurance coverage beginning in August without the premiums being paid for June and July. In this way, the benefit to the employee of June/July premiums is not that actual medical care was provided (or that the employee knew that the safety net was there). The benefit is that the employee can have coverage going forward.
posted by payoto at 7:22 AM on February 8, 2013


I think you're asking whether this would constitute good consideration. The answer seems to me to be pretty obviously "Yes," especially in the context of a complete severance contract. Paying retroactive premiums is a valuable thing to do. The court will not inquire into how valuable. It has some value, and that will be enough.

Sounds like the employee failed to adequately negotiate.
posted by valkyryn at 7:29 AM on February 8, 2013


If I remember correctly, the term for this is quid pro quo, the underlying principle of any trade/negotiation that stipulates that both sides of trade should be equal.

As valkyryn says, it is a little unclear in this case because the retroactive insurance has some value and may be a prerequisite for continued coverage.
posted by Yorrick at 7:56 AM on February 8, 2013


Thank you for all of these answers. They are all very useful and clarifying.
posted by otto42 at 8:08 AM on February 8, 2013


the underlying principle of any trade/negotiation that stipulates that both sides of the trade should be equal

Actually, no. Equality, as most people think of it, isn't part of the analysis. The requirement is that both sides agree to do, or refrain from doing, something, anything that they were not previously obligated. The relative and even the objective value of what each side offers is irrelevant as long as it isn't zero. Unless it appears that the sides are somehow conspiring to create a contract where one of the parties does nothing, whether the sides are of equivalent value doesn't enter into it.
posted by valkyryn at 10:04 AM on February 8, 2013


Ok, everyone else is wrong, so far.

This is a question of contract interpretation.

To recap: your friend was terminated on Jun 1 and negotiated a settlement agreement with his employer (a type of contract). The settlement agreement included a provision to cover six months of health insurance premiums, but did not specify which six months. The contract was finalized and signed with a date of August 1. After the contract was signed, the employer said that it would be covering two months retroactively (June - November). Your friend assumed that coverage would begin as of the date of the contract (Aug-Jan).

So what we have here is a contract with one important term (the dates of insurance coverage) left ambigious. Depending on the jurisdiction, the court might consider parole evidence (things like emails, notes, and testimony) about what the parties had in mind while negotiating the contract; or they might use one of several rules of contract construction to interpret the contract, without any outside evidence.

In this case, I think it would matter whether the employer had been actually paying the health insurance premiums in June and July while the contract was being negotiated. If so, and especially if the employee knew this, then the employer would have a strong argument that this course of conduct indicates that the parties intended the coverage to begin in June.

Another factor is that a gap in insurance coverage can be bad: if the gap is longer than 2 months, then the next insurance plan your friend is enrolled in might say that a preexisting condition can't be covered. (This may change with Obamacare, I'm not sure.) So ensuring that there is continuity of coverage (ie, starts immediately after the termination date instead of upon the signing of the settlement agreement) might be seen as the reasonable and standard interpretation of an employment settlement agreement.

BUT - consult your attorney about all of this. In some cases, you could just call up and whine about this to opposing counsel and they will throw in an extra two months. It's worth trying.
posted by yarly at 1:25 PM on February 8, 2013 [1 favorite]


the court might consider parole evidence

Parol is for contracts, parole is for convicts.

OP wants to know if there is a legal term for not exercising a right because one doesn't know about it. The answer is that there isn't. I stand by my original answer that it is the dictionary word of "ignorance". For example, millions of people do not claim the Earned Income Tax Credit even though they are entitled to it. Even they never bother to do it, they don't have any special legal remedy. It's file a timely return or you waive the EITC. Not knowing about this doesn't get you a break. This is just another version of "ignorance of the law is no excuse".

But, OP doesn't appear to really want to know about the hypothetical legal jargon. Instead, it's more about if this fired employee (perhaps OP or OP's friend) can get two more months of medical insurance. No one here can answer that question because no one here has seen the contract. However, it doesn't help the fired employee that he is utterly clueless about what is going on with the insurance during the negotiations period. If the matter were to come to suit, a very big point would be, "the insurance was so important to you that not only did you not have it set forth with specificity in the contract, but you had no idea about the state of the insurance premiums during the negotiations period." The fired person was willfully ignorant about the matter of the payment of premiums while the negotiations were going on, but now it's important? Tough sell in a courtroom for those of us who have been there.

The big underlying problem is that "the fired person can not benefit from the coverage because they can not go back in time" is simply not true. I benefit from my auto insurance even though I didn't have a crash last month. I benefit from my health insurance even though I incurred zero medical expenses last month. And, I certainly benefit from my life insurance even though I haven't died. This is how insurance works - a hedge against risk. If the risk is not realized, the coverage doesn't suddenly become valueless.

FWIW, I think the employer and fired employer are pretty shabby negotiators. Many lawyers and I settled multimillion dollar lawsuits over the course of a day's mediation, but a severance package takes two months? Come on.
posted by Tanizaki at 7:31 PM on February 8, 2013


Two months from termination date to having a fully executed settlement agreement is actually pretty quick in employment law. And at a mediation typically you iron out the big items (dollar amount) and then take a while longer to fully write up the agreement with all the sundry stuff.

If this ever went to trial, there is no reason why the court would accept the employers view of the meaning of the contract and see the employee somehow having waived his rights to assert his view, as you seem to be suggesting. Instead, the employer might be seen as the more powerful party and have the term construed against him, contra preferentum.
posted by yarly at 6:53 AM on February 9, 2013


Two months from termination date to having a fully executed settlement agreement is actually pretty quick in employment law. And at a mediation typically you iron out the big items (dollar amount) and then take a while longer to fully write up the agreement with all the sundry stuff.

This simply isn't how it works. The mediation agreement gets signed that day of the mediation. The reason is that everyone is afraid of someone changing their mind once the mediation is over. Not getting the settlement agreement and releases signed at the mediation is an excellent way to commit malpractice. A big reason is because since mediation negotiations are going to be confidential by statute, so the complaining party can't introduce a whole lot of evidence to convince the fact finder what the settlement discussion were in order to enforce the settlement. The case law is full of cases where a party didn't get an agreement signed at mediation and then couldn't get it enforced later for these reasons.

If this ever went to trial, there is no reason why the court would accept the employers view of the meaning of the contract and see the employee somehow having waived his rights to assert his view, as you seem to be suggesting. Instead, the employer might be seen as the more powerful party and have the term construed against him, contra preferentum.

This is not my experience as a commercial litigator at all. In real practice, we tend not to say "contra preferentum". For the non-Latin scholars reading this, that phrase is the legal doctrine that ambiguous terms in a contract are construed against the drafter or proposer of that provision. For this reason, just about every settlement agreement I have ever seen (and every one I use) has a clause that provides to the effect of, "no party or its representatives shall be deemed the drafter of this agreement or any of its drafts or any of its provisions and no provisions shall be construed in favor of one party on the grounds that such provision was drafted by the other." That why I said no one can answer questions about the contract because no one has read it - we have no idea if the contract as such a "joint preparation" clause. We also don't know if it has an integration clause. If there is an integration clause, kiss "parole" evidence goodbye. (except in very rare cases)

And, contra preferentum has nothing to do with the "power" of the parties. It has to do with who proposes the provision. If the employee is saying that he proposed that the six-month period begin upon execution, that gets construed against him.

And, as I've said from the word go, the employee has no damages. No damages, no claim.
posted by Tanizaki at 7:29 AM on February 9, 2013


I have mediated plenty of employment law cases - at the end of the day you have a binding term sheet, not the full agreement. I can only think of one case where we finalized the whole thing the day of mediation. You may have a different custom in your area of law, but that is how it very often goes in employment law.
posted by yarly at 11:22 AM on February 9, 2013


And dude, we are talking about breach of contract here, not tort claims and damages. This is a case of a contract with an ambiguous term. There is well established law in each jurisdiction about how to construe such terms, whether to admit extrinsic evidence, etc.
posted by yarly at 11:25 AM on February 9, 2013


I have mediated plenty of employment law cases - at the end of the day you have a binding term sheet, not the full agreement.

All I can say is, put your malpractice carrier on notice. Perhaps the stakes aren't as high in public interest law as they are in the commercial world.

And dude, we are talking about breach of contract here, not tort claims and damages.

Even in breach of contract, if there are no damages, there is no claim.
posted by Tanizaki at 1:24 PM on February 9, 2013


A few comments.

Maybe I wasn't clear, but reading the thread from the top leads me to believe that Tanizaki may have the time line of events out of order. Just to clarify:

I don't do employment law, but I do not see what the problem is here. How has the employee been damaged? Who did he think was paying the premiums in June and July?

The employee did not think anyone was paying the premiums and the employee was right. The premiums for June and July after the August 1 settlement. To get technical, and possibly off track, the employee new this because COBRA coverage was offered within days after dismissal at the much higher COBRA rate.)

Note that I am enjoying the discussion here and not much in money terms is at stake. As such feel free to consider novel interpretations of contracts terms, definitions of consideration, and the value that insurance provides.

That being said, I agree that health insurance paid to cover past periods has some value.

1. Simply, a medical bill incurred in July can be reimbursed because the employer paid the July premium in August. That has value.

2. Continuous coverage. I understand how this would have value, but it seem like the employer derives the value. (By assuring coverage is not broken, the employer assures no change in the premium rate.) In other words, under a settlement where a fired employee "wins" six months of coverage, and continuous coverage costs $2000 per month but broken coverage costs $3000 per month, keeping the coverage continuous would seem to benefit the employer.

3. Non-Intrinsic value of Insurance - Maybe not a question a court would like to answer, or could answer, or has the authority to answer.

Whereas 1 and 2 could have a monetary value placed on them, 3 still exists but it would be difficult or impossible or impractical to place a value on the "peace of mind" (for lack of a better term), that the knowledge that you have coverage, brings.

Maybe I'll try to simplify, but probably over simplify.

Imagine you are fired. You present your employer with a settlement offer two months after being fired (You have quite a lot of leverage and they are paying up on a whole host of other demands.) You say you want 6 months of health insurance payments covered. Actual contract ambiguities aside, what 6 months do you actually expect to get? (The next 6 or the previous 2 plus next 4.)

Lets keep this fun and interesting. No name calling.
posted by otto42 at 3:18 PM on February 9, 2013


Ok, everyone else is wrong, so far.

This is a question of contract interpretation.


Well, sure. I wasn't answering the question of whether the employer had the right to unilaterally determine the meaning of a contract term that wasn't adequately spelled out. I think probably not. But if the question is simply "Is providing retroactive insurance coverage recognized as being of legal value," the answer is unequivocally "Yes."

So this:

I understand how this would have value, but it seem like the employer derives the value.

. . .isn't actually relevant to that analysis, which party values a given line item more doesn't matter provided it constitutes a change in legal position that was not previously required.

For example, I don't smoke, and I have no plans to do so. But if someone offered me $100 not to smoke for the next six months, my not smoking would constitute valuable consideration, because I could have smoked if I'd wanted to.

Similarly, for the purposes of a consideration analysis it does not seem to me to make any difference whether coverage is provided from July through December or from September through February.

So it may be the case that the employee can get the employer to pay for January and February. But it won't be because paying for insurance in June and July lacked sufficient value.
posted by valkyryn at 5:08 AM on February 11, 2013


You say you want 6 months of health insurance payments covered. Actual contract ambiguities aside, what 6 months do you actually expect to get? (The next 6 or the previous 2 plus next 4.)

Well, this is all based on my understanding of COBRA and health insurance from a few years ago, so some of it could be outdated.

I would expect the six months to be retroactive to when I was terminated, because continuous coverage actually DOES have some value to the employee -- in some cases, it makes it so that my next insurer can't claim that my illness is a preexisting condition that they don't have to cover. (Note: not sure if this changes with the new health insurance law.)

In addition, I would have elected COBRA coverage immediately and started paying the premiums when I was terminated, because if you don't elect COBRA within 60 days you can't get it at all. So I would have already paid for those 2 months of health insurance, and I would want my employer to reimburse me. If I waited until the settlement agreement was finalized, I might have lost my chance to get COBRA coverage altogether and be screwed.

As a side note, when I practiced employment law we would typically ask that the employer cover health insurance premiums for the entire length of COBRA eligibility (usually 18 months), or until the employee became eligible for a new plan with a new employer. They would typically agree to this as part of the settlement package, if it was a package of any significant size. It's a nice little extra, because COBRA benefits aren't taxable, and in most cases the employee got a new job within six months, so it wasn't a huge extra amount of money for the employer. I don't know why, but psychologically employers seemed more willing to throw health insurance premiums in the mix even though it's technically all just money -- they seemed to be able to stomach paying for health insurance better than paying for additional severance.
posted by yarly at 7:55 AM on February 11, 2013


But if the question is simply "Is providing retroactive insurance coverage recognized as being of legal value," the answer is unequivocally "Yes."

But Mr. Valkyrn, what is the meaning of "legal value" in this context? Is it not the value of what one could obtain as a judgment in court? And is this not a contract case? If so, putting aside consideration, doesn't the "legal value" here turn on the meaning that the parties assigned to it in their contract?
posted by yarly at 8:00 AM on February 11, 2013


But Mr. Valkyrn, what is the meaning of "legal value" in this context? Is it not the value of what one could obtain as a judgment in court?

No. It is whether what each side has promised constitutes a change in legal position which was not previously required by either law or pre-existing contractual duties to the other party. Further, there are many examples of good consideration which cannot actually be recovered with a judgment, e.g., specific performance in personal services cases.

If so, putting aside consideration, doesn't the "legal value" here turn on the meaning that the parties assigned to it in their contract?

But I'm not putting aside consideration. I'm doing a consideration analysis. I don't give a fig whether the employer should have provided coverage for these six months or those six months, and that isn't the way the question was phrased. And in a consideration analysis, the court will completely disregard what the parties think something is worth, because something either is good consideration or it isn't, and the parties' opinions don't enter into it.

The existence of insurance coverage is something a court is going to recognize as inherently valuable, every single time. Questions of whether it's the right value may be important to the parties, but not for purposes of consideration. Again, the question is whether the retroactive provision of insurance is valueless, and the answer is, every single time, "No." It may not be the value you want, but it's still value.
posted by valkyryn at 8:37 AM on February 11, 2013


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