Monday, August 18, 2014

Bad Faith Claims Address Insurer Violations


Q:       What is insurer bad faith?
A:        Every insurer owes its policyholder a duty to act in good faith in the handling and payment of claims. This duty is inherent in every insurance contract and is based upon the relationship between an insurer and its policyholder. “Bad faith” occurs when the insurer violates its duty to handle and pay its policyholder’s claims in good faith. In Ohio, bad faith claims are independent tort claims that can give rise to damages beyond those available for breach of contract.
           
Q:       My insurance company denied my claim, so is it liable for bad faith?
A:        Maybe, but maybe not. Failure to pay a claim alone does not amount to bad faith. Rather, an insurer acts in bad faith if it refuses to pay your claim without reasonable justification. If the facts and law at the time of the denial are fairly debatable, the insurer’s denial may be reasonably justified. But if the insurer’s assessment of your right to coverage was arbitrary and capricious, its denial may not be reasonably justified.

Q:       My insurance company ignored my claim for months. Is it liable for bad faith?
A:        Possibly. Your insurer must promptly and reasonably investigate and respond to your claim. An insurer that performs inadequate or no investigation, or that delays investigation, can be liable for bad faith. Prolonged or duplicative investigation (for example, if an insurer delays by repeatedly asking for the same information or otherwise delays the investigative process) can also be bad faith conduct. Also, an insurer that engages in harassing, oppressive or exploitative conduct can be held liable for bad faith.

Q:       My insurance company eventually paid my claim, but only after a long delay, repetitive requests for information, and several misrepresentations about my rights. Do I have a bad faith claim?
A:        Yes, you may. In Ohio, unlike many other states, an insurer can be liable for bad faith claims handling even if it ultimately pays the claim.
 
Q:       I was in an auto accident and the responsible party’s insurance company will not pay the claim, even though it is clearly covered. Can I assert a bad faith claim against that insurance company?
A:        No. The duty of good faith arises from the contractual relationship between an insurer and its policyholder. Because you do not have a contractual relationship with the responsible party’s insurer, generally you cannot assert a bad faith claim against that company.
 
Q:       Can an insurance company make a claim for bad faith against me?
A:        No.  An insurer may deny your claim, but it cannot sue you for bad faith.
 
Q:       What do I get if I successfully assert a bad faith claim?
A:        A policyholder with a successful bad faith claim may recover compensatory damages (all damages flowing from the bad faith conduct, including attorneys’ fees), prejudgment interest if the statutory procedures are followed, punitive damages if the insurer acted with malice (ill will, hatred, or conscious disregard for your rights), as well as litigation costs and damages for emotional distress. 

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by attorney Jodi Spencer Johnson of the Cleveland firm, Thacker Martinsek LPA. The column offers general information about the law. Seek an attorney’s advice before applying this information to a legal problem.

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Monday, August 11, 2014

Ohio Legacy Trusts Protect Assets


Q:       What is an Ohio Legacy Trust (OLT)?
A:        The Ohio Legacy Trust (OLT), also known as a “domestic asset protection trust” (DAPT), is an estate-planning tool used to protect assets from future creditors. Ohio is one of 14 states in the United States that allow DAPT trusts. A person (the “trustmaker”) can create an OLT, fund the trust with his or her own assets, and be a beneficiary of the trust. Future creditors cannot access the trustmaker’s OLT assets if the trust was properly formed.

Q:       How do I create an Ohio Legacy Trust?
A:        To be valid, an Ohio Legacy Trust must: 1) be in writing; 2) appoint an Ohio trustee; 3) be irrevocable; 4) have a “spendthrift” clause (making the trustee responsible for distributions so that trust beneficiaries cannot assign trust assets and creditors cannot access trust assets); and 5) be subject to Ohio law. At the time your assets are contributed to the OLT, a “solvency affidavit” is also signed; it states that you are and will still be solvent after contributing your assets to the OLT.   

Q:        How might I use an Ohio Legacy Trust?
A:        An OLT is an estate planning and/or business planning tool. Normally an OLT includes estate planning distribution provisions for your heirs and beneficiaries similar to those of a will or revocable trust. An OLT does not replace a will, heath care power of attorney, living will, financial power of attorney or revocable trust, and you must coordinate the OLT’s terms and provisions with your other estate and business planning tools. Typically, OLT beneficiaries will include you (the trustmaker), your spouse and your children, but you can also name a charity, grandparent, parent or friends as beneficiaries. 

Q:       How does an Ohio Legacy Trust differ from a revocable trust?
A:        Unlike a revocable trust, the Ohio Legacy Trust is irrevocable (cannot be changed). Also, because you give up control of your OLT assets to an independent trustee, you should put only a small percentage of your assets or your excess assets, in the OLT.  The assets should not be encumbered by personal guarantees, liens, claims or lawsuits.

Q:       Who can form an Ohio Legacy Trust (OLT)?
A:         Any adult, business, corporation, out of state resident or out of state business can form an OLT.

Q:       What kinds of assets can I place in an OLT?
A:        Investment or financial accounts, mutual funds, investment real estate, shares of stock, LLC membership interests, artwork or personal property can be put into an OLT. IRAs and retirement accounts cannot be put into an OLT. Also, make sure the assets are titled in the name of the OLT.

Q:       How are OLT trust asset distributions made?
A:        You ask the independent trustee, in writing, for a distribution. Normally there is no limit to amount or the number of times you can request a distribution, but you can request a distribution only if: 1) proper steps were taken to form and fund the OLT; 2) the independent trustee has custody and control of the OLT assets; and 3) 18 months have passed without any threatened, existing or filed claims against you or the trustee.

Q:       Must the OLT’s independent trustee grant my distribution request?
A:        No. The trustee can refuse to distribute your OLT assets. This can be frustrating, but it helps to protect your  OLT assets from creditor claims.  

Q:       Can any creditors access OLT assets?
A:        If properly formed, and the required time period has passed (18 months) with no claims, future unknown creditors cannot access funds in the OLT. Ohio law does provide exceptions to this rule for child and spousal support (alimony). 

Q:       How much can I put into an OLT?
A:        Generally, you can fund your  OLT with assets not needed for monthly bills, loan payments, expenses or longer-term debts. Because OLT distributions are made by an independent trustee, you may not be able to get your money out, so don’t put in more than you can afford to lose.

Q:       Who can be an OLT trustee?
A:        An independent trustee should not be related to or under the control of the trustmaker or any of the beneficiaries. Independent trustees may include, for example, corporate bank trustees, institutional trustees, professional trustees, accountants, attorneys or financial planners.

Q:       Does a trustmaker need an attorney to form an OLT?
A:        Yes. Because the formation of  OLTs involve, giving up rights to assets, creditors’ rights, beneficiary rights and tax and estate planning issues, it is wise to engage an attorney experienced in OLT matters.  

This "Law You Can Use" consumer legal information column was provided by the Ohio State Bar Association. It was prepared by D. Bowen (“Bo”) Loeffler, Esq. of Port Clinton/Sandusky. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

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Monday, August 4, 2014

Know How State and Federal Taxes May Affect a Decedent’s Estate


Q:       Weren’t estate taxes eliminated in Ohio?
A:        While the Ohio estate tax was repealed effective January 1, 2013, a decedent’s estate may have to pay a federal estate tax if the gross estate is more than $5.34 million dollars (“the exempt amount”).

Q:       What is the tax rate for estates that exceed the exempt amount?
A:        The tax rate is 40 percent.  This rate also applies to generation-skipping transfer tax (when, for example, a distribution is made from a grandparent to a grandchild).

Q:       Can any tax deductions be taken from the decedent’s gross estate?
A:        Yes. Typical deductions include expenses associated with the decedent’s funeral and burial, debts and obligations, gifts to charities and most transfers to the surviving spouse.

Q:       Should an estate file a federal estate tax return if all assets are transferred to the surviving spouse?
A:        Maybe. When the decedent’s gross estate exceeds the exempt amount, a return (Form 706) must be filed even if the taxable estate is zero. Also, the estate may elect to file a return when the gross estate is less than the exempt amount. Doing so may allow the surviving spouse to leave combined net assets of $10.68 million dollars in the estate, but the family would not have to pay federal estate taxes. 
            For example, let’s say a man dies and leaves $4 million dollars to his wife. His wife does not have to file a federal estate tax return.  If the wife has $4 million dollars of her own assets plus the $4 million dollars she inherited from her husband, her gross estate would be $8 million. Approximately $3 million dollars of this $8 million would be subject to federal estate taxes. However, if she files a federal tax return at the time of her husband’s death, she can claim the unused exempt amount of $4 million dollars for her husband as well as her own exempt amount. This will leave her with a combined $8 million dollar exempt amount, which will eliminate the federal estate tax.

Q:       Will accounts held as “transfer on death” or “payable on death” avoid federal estate tax?
A:        No. The transfer of property can be accomplished quickly after a person’s death through the titling of assets as “transfer on death” or “payable on death,” but most of these assets will not escape estate tax liability.

Q:       Can I give all of my property away during my life to avoid estate taxes?
A:        No. The federal tax structure is considered a “unified” estate and gift tax system. This means that transfers made while you are alive are added together with those that are distributed when you die to determine if your total assets exceed the exempt amount. This is called a lifetime computation.

Q:       How does the federal gift tax work?
A:        Under the current law, an individual can give $14,000 (“the annual exclusion”) to another person (the “donee”) without filing a federal gift tax return. The annual exclusion is based on the amount of the gift made to each donee and not on the total amount given by the donor. For example, one parent can give $14,000 to each of his or her four children (a combined gift of $56,000) without filing a gift tax return. If the donor is married, the annual exclusion can double (called “gift splitting”). Thus, this couple could give $28,000 to each child without filing a gift tax return even though only one spouse made the gift. When the aggregate amount exceeds $14,000 per donee, a gift tax return (Form 709) must be filed by April 15 following the calendar year. The excess amount over the $14,000 reduces the future exemption amount available when the donor dies.

Q:       I received a gift of property from my parents. Do I have to pay taxes on its value?
A:        No. You do not have to report the gifted asset as income. However, if you sell the property at a later time, then you will have to pay income taxes based on your parents’ basis. “Basis” is the amount a person pays to purchase a property plus whatever the person spent to improve the property. For example, let’s say a couple paid $15,000 for their home in 1950.  When they deeded the house to their only son in 2014, its value was $100,000. When their son sells the home, he will have a capital gain of $85,000. The son will have to pay taxes on this capital gain amount. 

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by attorney James B. Curtin of the Columbus firm, Hrabcak & Company, L.P.A. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

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Monday, July 28, 2014

Employers and Employees Use Collective Bargaining to Negotiate Employment Terms


Q:       What is collective bargaining?
A:        Collective bargaining is the negotiation of matters regarding employees’ wages, benefits and other terms and conditions of their employment. Collective bargaining occurs between the employer’s representatives and the union, which the employees have selected to be their exclusive bargaining representative. 

Q:       What law governs collective bargaining?
A:        Most private employers are covered by the National Labor Relations Act (NLRA), which is enforced by the National Labor Relations Board (NLRB). Some businesses in the railroad and airline industries are covered under the Railway Labor Act, and some very small enterprises may not be covered at all. Civil servants in the federal government are covered by the Civil Service Reform Act, and state, county and municipal workers fall under state or local laws. Postal workers are covered under the Postal Reorganization Act, the NLRA and the Labor Management Relations Act.
            Public employers are also governed by the state’s collective bargaining law, which, in Ohio, is enforced by the State Employee Relations Board (SERB). State collective bargaining laws limit the right of certain workers, such as police and firefighters, to strike. These workers are subject to final offer arbitration, known in Ohio as conciliation.

Q:       What must be included in a collective bargaining agreement?
A:        The law does not dictate contract terms and neither the NLRB nor SERB will impose terms upon the parties without their agreement. Rather, the law provides a framework so management and labor can negotiate a contract governing wages, hours and working conditions. The law limits the unilateral power of employers, protects workers’ rights to organize and engage in “concerted activity for mutual aid and protection” and prohibits discrimination against workers who exercise these rights.


Q:       What does it mean to bargain “in good faith?”
A:        It means that the parties must negotiate with honest intentions about the wages, hours, terms and conditions of employment and provisions of a collective bargaining agreement. Good faith is mutual obligation to meet at reasonable times and places, and to bargain with the intention of reaching agreement or resolving contract questions. “Hard bargaining” (taking a strong position on an issue) does not violate the law, but the following approaches constitute bad-faith bargaining and do violate the law:
·       surface bargaining (going through negotiation motions without intending to reach an agreement);
·       a “take-it-or-leave-it” approach; and
·       refusing to meet, delaying meetings or failing to give the chief negotiator sufficient authority to make agreements.
           
            If either party fails to bargain in good faith, the other may file an unfair labor practice charge. Good faith is determined based on the totality of circumstances.

Q:       Must an employer bargain with the employee’s union over everything?
A:        No. The law recognizes these three types of bargaining subjects:
·       Mandatory subjects involve issues of wages, hours and working conditions. The parties have to bargain over mandatory subjects.
·       Permissive subjects involve subjects other than wages, hours and working conditions (e.g., ground rules for negotiations, settlement of unfair labor practice charges or pension benefits). These may be voluntarily discussed but cannot be bargained to impasse, and either party may refuse to bargain over a permissive subject. If the parties do reach agreement on a permissive subject and incorporate it into a collective bargaining agreement, then they must abide by that agreement.
·       Illegal subjects include any proposal that violates National Labor Relations Act (NLRA), the Public Employees Relations Act (PERA), the Civil Service Reform Act (CSRA) and/or any other federal, state, county or municipal law. Illegal agreements/provisions are void and cannot be enforced.

Q:       May an employer change employment conditions during bargaining?
A:        No. Employers must maintain the “status quo” regarding existing wages, hours and working conditions, even if a contract has expired—unless there is an impasse in negotiations. An impasse means that neither party is willing to compromise further to reach an agreement. If a legal impasse has been reached on an issue, the employer may then unilaterally impose on its employees its last offer regarding that issue. For certain public employees (e.g., police and firefighters), the employer must maintain the status quo until an agreement is reached, either mutually or through conciliation.
           
This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by attorney Margaret J. Lockhart, an OSBA Certified Specialist in Labor and Employment Law who is associated with the firm of Marshall & Melhorn. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

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Monday, July 21, 2014

Getting, Modifying and Replacing Social Security Cards: What You Should Know


Q:       How do I get a Social Security number for the new baby we’re expecting?
A:        When you apply for your baby’s birth certificate, you can apply for a Social Security number at the same time. If you have the baby in a hospital, you can complete both applications before you leave the hospital. Learn more about Social Security cards through www.socialsecurity.gov/pubs.

Q:       We adopted a baby girl from overseas and brought her to the U.S. Can we get a Social Security number for her?
A:        Yes. Generally, you must complete an application for a Social Security card (Form SS-5 (see www.socialsecurity/gov/ssnumber).
You must provide:
1)     documents that prove your child’s U.S. citizenship or immigration status; adoption; age; and identity;
2)     a document proving your identity;
3)    evidence establishing your relationship to the child. (You can use the adoption decree or the child’s amended U.S. birth certificate for this purpose.)
            Usually, you can mail or take your application and original documents to your local Social Security office. All documents must be originals or copies certified by the issuing agency. You will receive your child’s number and card by mail once the Social Security office has verified your documents.
            If you do not yet have proof of your child’s citizenship, a Social Security number may be assigned based on Department of Homeland Security documentation issued when your child first arrived in the U.S. Once you’ve received your child’s citizenship documentation, take it to the Social Security office so your child’s record can be updated.

Q:       Can I use a plastic version of my paper Social Security card?
A:        The Social Security Administration does not recommend using plastic or metal versions of your card, or making copies of or laminating your paper card, or carrying your card with you. Generally, you will only need to produce your Social Security card when you apply for employment. Keep any document that includes your Social Security with your important papers, and question anyone other than your employer who asks for your number or your card. Learn more at www.socialsecurity.gov/ssnumber.

Q:       How do I change my name on my Social Security card?
A:        Gather documents proving your legal name change (e.g., marriage license, divorce decree, certificate of naturalization showing a new name, or a court order showing your name change). Also collect evidence of your identity (driver’s license or state-issued ID) and your U.S. citizenship or immigration. Then, complete an application for a Social Security card and take it, along with your documents, to your local Social Security office. Documents must be originals or copies certified by the issuing agency. Mailed documents will be returned with a receipt. Once the Social Security office receives the application and documents, your new card will be mailed to you. It will show your old number and your new name.

Q:       If I lose my Social Security card, can I replace it?
A:        You should know your Social Security number, but you may not need to replace your card, since you will rarely need to show it. However, if you want to replace your card, you can take or mail an application to your local Social Security office, along with original documents or certified copies from the issuing agencies, proving your identity and your U.S. citizenship or your current work-authorized immigration status. If you are a noncitizen without a work permit, you must provide a letter from a federal, state or local government agency stating that you meet the requirements for a Social Security benefit and explaining why you need a number.

The information for this “Law You Can Use” column was provided by the Social Security Administration. It was prepared by the Ohio State Bar Association. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

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