Family harmony can be jeopardized when difficult decisions need to be made and adult siblings and parents don’t agree. Maybe you think your Mom should move into assisted living. Or, maybe you’re uncomfortable with Dad’s driving. You might think that it’s time to sell the family cabin, but your sister loves the cabin and can’t bear to part with it and all the memories.

Where do you go when the people most like you – those sharing your genes – and with whom you have more history than anyone else in the world, can’t see eye to eye? The legal system isn’t your best option if you’re hoping to continue those family ties after the issue is resolved. A better option is mediation.

Mediation allows decisions to be made by the people most affected. It’s a confidential process which allows for creativity but requires compromise. A trained mediator can facilitate a discussion with the ultimate goal of preserving family relationships while resolving the complex interests of all involved.

If decisions are being made for and sometimes with an elderly parent, that parent is going to want to preserve as much independence as possible. Adult children might have competing concerns about safety and appropriate care.

And then there’s money – who has it, who needs it and what’s the plan for the future? Liz Schading and Bill Huefner are teaming up to bring you their combined expertise in family mediation and estate planning/tax.

Liz has been a family law lawyer with BGS since 1992, and rule 114 qualified in mediation since 1994. Bill, a former IRS agent, has been practicing probate, estate planning and tax with BGS since 1993. We can mediate at our location or yours.

Call Liz at 763-783-5144 if you are interesting in finding out what we can do for you.

Barna, Guzy & Steffen LTD. announces the addition of two new associates to our firm.

Joe M. Wearmouth and Sheldon M. Clark have joined the firm’s Business Litigation/Employment Law section.

Joe has worked previously as an associate attorney at a large downtown Minneapolis-based law firm where he litigated complex civil cases and worked on sophisticated commercial and residential real estate transactions. He has also appeared in state and federal courts for trials and discovery and dispositive motion hearings.

Joe is a 2009 graduate of Hamline University School of Law and graduated summa cum laude, ranking first in his graduating class. He was the recipient of the M. Arnold Lyons Award for Highest Academic Performance in the Graduating Class.

Sheldon has most recently worked as a Judicial Law Clerk to the Honorable Tammi A. Fredrickson, Tenth Judicial District, in Anoka. He also has experience as a Civil Division Law Clerk for the Ramsey County Attorney’s Office.

Sheldon graduated from William Mitchell College of Law, in 2008, magna cum laude. He was a Student Ambassador and a Professorial Research Assistant.

“The addition of these new talented attorneys will benefit our existing clients and help expand our business opportunities,” said Joan Quade, Shareholder and Practice Group Manager of the Business Litigation/Employment Law section.

The Shareholders of Barna, Guzy & Steffen, Ltd. announce that Karen K. Kurth
has been voted in as the 21st Shareholder of the firm.

Karen practices in the firm’s Employment Law and Business Litigation section focusing her practice on commercial litigation, employment litigation and counseling, construction litigation, real estate litigation, landlord/tenant law, shareholder disputes, and appellate advocacy. Karen’s extensive background in accounting and commercial insurance enhances her ability to evaluate and successfully resolve a broad range of employment and commercial litigation issues.

Karen received her J.D. at William Mitchell College of Law in 2002, graduating Magna Cum Laude. She was admitted to the Minnesota State Bar in 2002 and to the U.S. District Court for the District of Minnesota in 2004. Karen joined Barna, Guzy, & Steffen as an associate in 2004.

~ by Jon P. Erickson, Attorney at Law, Criminal Law

Mn now has an ignition interlock program for those people who lose their drivers licenses because of various levels of DWI convictions, or the loss of their driver’s license because of an over .08 blood alcohol reading or a refusal to give a test. The program is voluntary so no Judge or Driver’s License Bureau can force one into the program. The program is somewhat expensive and intrusive so it won’t work for all who find their drivers license taken away from them by state for an alcohol related matter. It can be a workable option, however, because one can get a license after only 30 days of cancellation regardless of why one lost their license. These licenses can have limitations or restrictions depending on the driver’s circumstances. In the past it could be even one year or more before one could get a license of any kind. There is a good explanation of the program at www.minnesotaignitioninterlock.org.

While the website has a lot of good information to help someone who wants to look into this program, I would suggest that one should also contact his/her attorney because of how the ignition interlock interplays with other punishments and sanctions for a DUI related matter. Any person faced with this license problem needs to be aware of all of the options.

One of the main issues is the cost of the system. Anyone who wants to get their license back will always have to pay a reinstatement fee that is currently $680. In addition they will have to pay a small application fee that varies between counties. The actual installation cost for the interlock system varies between vendors but there is an installation fee of some $100, monthly maintenance fees of between $60-125, a lockout fee of $50 should that be done and a removal fee of $50. Rates are subject to differences between vendors, and subject to change.

One’s license when on the interlock system can have limitations such as times to drive and etc just like the existing system and there will also be restrictions; the most significant is the interlock ignition itself. If one has prior DWI related convictions or drivers license cancellation{s} the interlock license can have limitations for even 1-4 years before it would transcend to only the restrictions inherent in the interlock system. Those restrictions include signing an interlock participation agreement, and monthly calibration meetings with the vendor to harvest the data from the devise to check for violations, the signed agreement by you makes you responsible for any misuse of the system. The longest period of time one could be on the interlock system is 6 years under current laws.

If the violation is the second, or more alcohol related incident for the driver there will be other restrictions on getting into the interlock system. The most significant may prove to be the provision that requires all outstanding court (fines) or child support fees to be paid before one is eligible to get on the system. It’s not clear if this includes restitution. In addition, if one has had a prior driver’s license cancelation for inimical reasons enrollment in a treatment program will be required. One will have to have interlocks on any vehicle they will be driving, and anyone using the vehicle will need to be trained on how to use the device. All interlock vehicles will have to be properly insured.

The device is relatively small, and attaches to your steering column. It does not take much to run so it should have no major effect on the mechanics of your motor vehicle. It is a breath analyzer device that is designed to prevent someone from starting the vehicle if their blood alcohol is over a designated amount. That could be a zero tolerance level if one of the drivers condition is no use of alcohol. It has a rolling retest requirement which is designed to prevent from having someone other than the operator give the initial sample test. It has been in use in other states for a number of years so the supporters feel that is ready for use in Mn. Any attempt to “trick” the device is a crime as well as an automatic termination from the program.

The system while expensive should prove to be a workable option for those drivers who would otherwise be looking at a long period of time i.e. 1-3years without any type of license. It may not be as usable for those with less time on driver’s license limitations such as the first or even second time offenders are facing. It will also provide for fewer limitations on ones license. It is hoped that it will prevent careless future illegal use of ones vehicle, and help prevent more long term problems with the license of some repeat type offenders by helping prevent repeat offenses. It could even save a driver money by not having to relay on other means of transportation i.e. cabs, other drivers and the like.

We encourage you to contact us a BGS for any questions, or for help in getting into the ignition interlock system. As always, please call us if you or friend and family are faced with any alcohol related charges or problems.

UPDATE July 5th, 2011

An article in the Twin Cities Pioneer Press on July 1, 2011 explained some further benefits of the DWI ignition interlock device. Find the link at DWI ignition interlock device available today.

Attorney W. James Vogl, Jr. will join the law firm of BGS and practice “of counsel” in the specialty area of Employee Benefits Law with an emphasis on Employee Stock Ownership Plans (ESOPs).

Jim has worked with medium sized closely-held companies in designing, implementing and maintaining ESOPs for its employee/owners. Jim also provides additional legal services related to retirement plans and general corporate legal work.

Mr. Vogl has practiced in the area of employee benefits since 1993 and has worked on hundreds of ESOP transactions for clients in all manner of business.

“Adding Mr. Vogl “of counsel” to our firm allows us to expand into an area of law previously not offered by our existing attorney base,” said Jeffrey Johnson, President of Barna, Guzy and Steffen, Ltd.

To contact Mr. Vogl, interested parties may reach him at BGS at 763-783-5163 or jvogl@bgs.com. More information about Jim and his law practice can be found at www.bgs.com.

Established in 1938, Barna, Guzy & Steffen provides a variety of legal services for individuals, companies and governmental agencies and has worked with thousands of clients in the metro area. For more information about the firm, visit www.bgs.com.

A Tradition of Service since 1938

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This past year Attorney Joan M. Quade, division leader for the commercial litigation practice group at BGS, volunteered as a coach to the Spring Lake Park High School’s Mock Trial Team.

Mock Trial is a competition where participating schools are given a real legal case which was developed by the Minnesota State Bar Association. Each school’s students then discuss the case and are subsequently assigned to either attorney or witness roles. In some cases, team members may play more than one part. The students prepare the case like an actual trial. They must be able to compete on either the defense or plaintiff/state’s side doing both direct and cross examination and objections just as in a real trial. They practice extensively and compete in simulated trials against other schools.

The team consisting of mostly sophomore students did extremely well and one member was awarded a perfect score in one of the competitions. Even though they did not make the State competition this year, members of the Spring Lake Park High School’s Mock Trial team had the opportunity to attend and observe the State Mock Trial Competition in Duluth on March 8, 2011.

The legal case used by the Minnesota Mock Trial teams this year was based upon the criminal trial in the Condon murder case which occurred in Duluth in the 1970’s at the now famous Glensheen mansion.

Joan Quade said that “Attending the state competition was the reward and culmination of a year of hard work by our team on the Congdon Mock Trial case. Mock Trial builds confidence, public speaking skills and analytical thinking.”

Congratulations to BGS Attorney William Huefner who was named a 2011 Five Star Wealth Manager by Crescendo Business Services in January’s Mlps-St. Paul Magazine and Twin Cities Business.

Bill is a shareholder in the firm’s Estate & Tax Planning/Probate & Trust areas of law. He has professional experience as a former IRS Agent and as a Certified Public Accountant (inactive). This experience assists him in understanding the issues of today’s clients and helping them plan for the future of their estates.

Crescendo Business Services chose the 2011 Five Star Wealth Managers based on a random survey of over 96,000 high-net-worth households and all identified FINRA registered representatives within the Twin Cities area.

Before finalizing the list, wealth managers were reviewed by a blue ribbon panel of individuals from within the financial services industry.

The honor of being named a 2011 Five Star Wealth Manager then goes to an elite group, representing less than 5% of the existing wealth managers in the Twin Cities area.

Authored by:
Jeffrey S. Johnson and Kristin N. Blenkush

Introduction
For the uninitiated, commencing negotiations on a complex charter school lease can be overwhelming. These materials are intended to provide a basic overview of some of the most important provisions likely to be found in a charter school lease.

Leasing Guidelines Specific to Charter Schools
Because charter schools may not use state money to purchase land or buildings (Minn. Stat. § 124D.11, Subd. 7), gaining an understanding of basic leasing concepts is important. In addition to the general education revenue provided to charter schools, charter schools may be entitled to additional public funding through building lease aid. Under Minnesota law, charter schools may apply for building lease aid in order to rent a building or land for instructional purposes. Minn. Stat. § 124D.11, Subd. 4.

The Minnesota Department of Education reviews and either approves or denies a applications for lease aid using certain criteria specified by statute. These criteria include (1) the reasonableness of the price (the rent) based on current market values, (2) the extent to which the lease conforms to applicable state laws and rules, and (3) the appropriateness of the proposed lease in the context of the space needs and the financial circumstances of the charter school. Minn. Stat. § 124D.11, Subd 4. The department must review and approve or disapprove leases in a timely manner. Minn. Stat. § 124D.10, Subd. 17.

Charter schools are expected to make up the difference between state aid and actual rent by spending general aid funds. The rent provisions of leases for charter schools must be drafted and reviewed carefully by the charter school, as amounts received as building lease aid may not be used for custodial, maintenance, service, utility, or other operating costs.

Due to potential conflicts of interest and limitations involving “related parties,” charter schools need to pay special attention to who the landlord is under the lease. Charter schools may lease space from independent or special school boards which are eligible to be an organizer, other public organizations, private, nonprofit sectarian organizations, private property owners, or sectarian organizations if the leased space is constructed as a school facility. Minn. Stat. § 124D.10, Subd. 17.

Charter schools may not enter leases with related parties unless the related party / landlord is a nonprofit corporation under Minnesota Statutes Chapter 217A or a cooperative Minnesota Statutes Chapter 308A and the lease is reasonable. A “related party” is an affiliate or immediate relative of the other party; this includes an affiliate of an immediate relative or an immediate relative of an affiliate. Minn. Stat. § 124D.10, Subd. 23a(b)(1). The term “affiliate” means a person that directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with the other party. Minn. Stat. § 124D.10, Subd. 23a(b)(2).

Charter school leases involving related parties must include the following statement (unless the landlord is a nonprofit or cooperative): “This lease is subject to Minnesota Statutes, section 124D.10, subdivision 23a.”

What are the “Premises”?
The lease must clearly define the exact space being rented by the tenant. Often this will include both a street address and a site plan showing a depiction of the premises, and sometimes it will include a legal description. The square footage of the premises should be included as well. From the tenant’s perspective, it is important to make sure the lease clearly defines the premises, and that the premises described in the lease matches the premises agreed upon by the parties. The tenant will also need to make sure that the premises include sufficient parking spaces, outdoor areas, and signage rights to allow the school to operate.

How long is the Term”?
There are many variables to consider in negotiating the term of the lease. In short-term leases, the tenant has the benefit and flexibility of being able to vacate, but on the other hand it may soon be faced with a decision on the desirability of moving—or that decision may be forced upon the tenant.

In a long term lease, the tenant may be able to negotiate more favorable terms, and also have the predictability of rent for the entirety of the term; but the flexibility is greatly reduced. The most appropriate term for your school will depend upon a great many factors, including whether and under what circumstances the lease can be renewed or extended.

The term of the lease is defined by stating precisely when the lease starts and when it ends in the lease. However, determining the actual commencement date of the lease is not always simple. The landlord’s ability to deliver the premises by a specified date will be affected by various factors, including, for example, situations where the premises are currently occupied and the current tenant fails to vacate before the starting date of the lease. The lease should state clearly what happens if the premises are not ready for occupancy by the specified commencement date. Further, if the premises are to be completed or remodeled prior to the commencement date, delays in construction, even those beyond the control of the owner, can impede timely delivery. These possibilities should be considered in advance, and the lease should be structured to address them.

Rent: is this a gross lease or a net lease?
The lease needs to specify exactly what is included in rent, and what items the tenant will have to pay for in addition to the rent. Most leases are gross leases, triple net leases, or fall somewhere in between. Unfortunately, not all leases will state explicitly which type they are, so you need to read the lease carefully.

A “gross lease” is generally all-inclusive, meaning that the tenant pays the landlord a flat monthly rate and the landlord is responsible for payment of real estate taxes, insurance and maintenance expenses for the building, the grounds, and all common areas. Tenant utilities may or may not be included within a gross lease, so even under a so-called gross lease, there may be add-ons or other additional charges.

In the more common “triple net lease” (also referred to as a “net lease”), the tenant pays a set rental amount to the landlord (usually referred to as “base” or “minimum” rent), but also pays a share of the landlord’s real estate taxes, insurance, and maintenance and operating expenses. For single-tenant buildings, the tenant’s “share” of these items will be 100%. The tenant needs to review the lease carefully in order to fully understand what items will be included in these expenses. The concept of “operating expenses is addressed in more detail below.

Understanding the difference between a gross and triple net lease is particularly important when comparing multiple spaces because it helps to ensure you are comparing apples to apples. And again, you need to make sure to read the lease carefully. Even in a gross lease, the tenant may be responsible for certain payments in addition to the base rent, and it is important to try to pinpoint in advance what these expenses could be.

How is Rent determined?
A commercial lease should clearly define what the rental rate will be for the entire term of the lease. In most leases, the annual rental rate increases from year to year either by a flat amount (for example, a certain percentage every year) or by reference to an exterior formula (say, in proportion to increases in the cost of living allowance).

What items are included in Operating Expenses or CAM?
A “net” or “triple net” lease will state the amount the tenant must contribute toward operating expenses (also known as “common area maintenance” expenses, or CAM) in addition to the base rent. Where specific amounts are not listed, the lease should state how such expenses are calculated. Typically, operating expenses include items such as the cost of snow removal, security for the property, landscaping, janitorial services, ongoing building maintenance, and building management fees. The simplest and most common method for determining a tenant’s share of operating expenses is to divide the number of square feet in the tenant’s premises by the total number of rent-able square feet in the building. Of course, commercial leases do not always handle things in the simplest manner, so the allocation of operating expenses should be reviewed carefully.

It is a good idea for the tenant to obtain information in advance from the landlord about the current budget for the building so that the tenant has an idea of what to expect for operating expense charges. The tenant may also request and negotiate that the landlord impose a cap on the amount that can be charged as operating expenses, or a cap on the increase in any given year, so that there is some additional stability in predicting rental amounts.

Tenants should generally seek to limit the operating expenses to those costs which truly relate to common areas of the landlord’s property. On the other hand, landlords will want this language to be as expansive as possible so that they can pass as many of their expenses as possible on to the tenant.

It is also worthwhile to negotiate an exclusion from operating expenses for capital expenditures. Tenants should negotiate this provision to provide that capital items will be amortized over their useful life, with the tenant paying only the portion of the expense that falls within its lease term.

Use: what can you do in the Premises?
The lease should specify what the tenant can and cannot do in the premises. As a tenant, you will need to make sure that your proposed “use” has been specifically approved by the landlord in the lease. Any unusual or out of the ordinary activities should be included in the “use” so that the landlord is aware and cannot claim a breach later when such unusual use is discovered.

Who is responsible for maintenance, repairs and replacements?
The lease should clearly define who is responsible for repairs in the premises, the building, the parking lot and the core structural building systems, such as plumbing, electric, heating, ventilation and air conditioning. The question here is not only who pays for the repairs, but who is responsible for making sure the repairs are made in the first place. In commercial leases, typically the tenant maintains the interior of the premises and any core building systems to the extent they are located within the premises, while the landlord maintains the structure of the building, the roof and the general mechanical systems of the building.

Who is preparing the premises for occupancy, and who is paying for such preparation? What if the tenant desires alterations later?
Prior to moving in and opening for business, the premises may require renovations in order to suit the tenant’s use. If any renovations are to occur, the lease should state whether the landlord or the tenant will make improvements to the premises. When the landlord pays for the improvements, the amount spent by the landlord is usually called an “allowance.” If improvements are contemplated, the lease must clearly state what improvements will be made, who will complete the improvements, when the improvements will be complete, the amount of any allowance, and when and under what conditions the allowance will be paid.

A related question is what alterations the tenant will have the right to make to the premises, and whether the landlord’s consent will be required prior to making such alterations. For the tenant’s convenience, non-structural alterations such as painting or installation of carpet should not require the landlord’s consent. One way to address this issue is to set a monetary threshold which provides that prior to meeting the threshold, consent is not required. Some leases provide, for example, that no landlord consent is required for non-structural alterations which do not exceed a certain amount, and that anything exceeding that threshold would require landlord consent.

These provisions should also identify which party will be responsible for removal of the improvements at the end of the lease term. This removal may be an expensive budget item and should be considered at the time the improvements are made.

Will there be a Renewal Option or an Expansion Option?
Renewal Option
Commercial tenants often negotiate a right to renew or extend the term of the lease beyond the original term. If the lease does not include such an option, the tenant’s rights will not be superior to the rights of any other prospective tenant, and the tenant will certainly have to pay the going rate for a renewal. Options of renewal are usually at an increased rental rate.

Some leases provide that the renewal term will be at “market” rent. From the tenant’s perspective this is usually less favorable. If the rental amounts are chosen in advance, but market rent turns out to be lower, the tenant has the option of simply not exercising the renewal option or negotiating a lower rate. If the rental amounts are chosen in advance, and market rent turns out to be higher, the tenant gets the benefit of the lower rate. Conversely, if the renewal option just states that the renewal will be at “market” rent, the tenant is subject to the whims of the real estate market. Further, if the tenant exercises the option, and then the “market” rent determined by the landlord is much higher than the tenant expected, the tenant should have the right to rescind its exercise of the option.

It is also important to pay attention to how the option is exercised. For example, the lease may provide that the tenant must give notice six months or a year in advance in order to exercise the option. If the tenant forgets to give such notice, the lease may expire at the end of the original term, or the lease may be extended automatically in the absence of advance notice by the tenant. Consider your options carefully when negotiating a renewal option to make sure that you are not getting locked into a renewal term when you thought the lease was ending.

Expansion Option
In multi-tenant buildings, tenants may negotiate a right to expand into additional space should extra space become necessary for the tenant’s operations. If you anticipate rapid growth, it would be worthwhile to consider an expansion option, rather than face a decision to relocate after a short period of time.

What rights will the tenant have to sublet or assign the lease?
There are many benefits to a tenant in incorporating a flexible right to sublet or assign the premises in the event the space is no longer needed. The right to sublease offers some flexibility in the event of unforeseen circumstances—either good or bad. A right to sublease or assign is usually restricted at least to the extent of requiring the consent of the landlord. This restriction is not objectionable if it includes the caveat that the permission will not be unreasonably withheld. Even then, there can be disputes over what is “reasonable.” Most landlords will require that the subtenant or assignee meet the same standards as the other tenants in the building and accept all the restrictions included in the original lease.

If the premises are subleased or assigned, the landlord may require that the original tenant remain responsible for the lease payments. If the new tenant defaults, the original tenant will be liable for the rents. It is worthwhile to negotiate this provision with the landlord, and to request that if the replacement tenant is strong financially, that the original tenant will be released from responsibility under the lease.

Where the lease is silent on the rights or restrictions regarding subleasing, tenants have the right to sublease the premises or assign the lease as a matter of contract law. Usually, landlords will want to limit such assignments or subleases to situations where the landlord has consented in advance to the transfer.

What Security will the landlord require?
There are three common methods that landlords use to secure the payment of rent under the lease: security deposits, letters of credit, and personal or corporate guaranties. Security deposits are the most common. The amount and extent of security required will vary depending on numerous factors, including the tenant’s financial history, whether the landlord is providing a free rent period or substantial construction allowance, and the number and strength of the guarantors.

The amount and type of the security required will generally depend on the creditworthiness and operating history of the tenant. It is not uncommon for a landlord to require some combination of the three. From the tenant’s perspective, it is best to reduce exposure on the security by negotiating a small deposit or letter of credit, or by capping the liability under the guaranty.

If the landlord insists on a large security deposit or letter of credit, or an unlimited guaranty, another option is to negotiate reductions in the amount of the security over the term of the lease. The landlord’s risk decreases as the term of the lease progresses, so some landlords will agree to reduce the security periodically throughout the term so long as the tenant has not been in default. Note that unlike residential leases, landlords have no responsibility to return interest earned on the security deposit to the tenant at the end of the lease term.

Who is responsible for compliance with the law?
Tenants should seek warranties from the landlord that the premises are in compliance with all laws, including environmental laws, local codes, and the Americans with Disabilities Act. Landlords will typically try to push this risk back to the tenant. A standard compromise is that the landlord is responsible for compliance (and the cost of compliance) with all laws affecting the premises and existing as of the commencement date of the lease, and that the tenant becomes responsible for such compliance from and after the commencement date.

What happens if there is an interruption in utility service?
Most tenants will not be able to function when utility services such as water or electricity are interrupted. Tenants should try to negotiate a lease provision stating that if such an interruption is caused by the landlord, the tenant shall have the right to abate the rent until it is restored. A standard compromise here is to give the tenant the right to abate rent after the utility service has been continuously interrupted for a given period of time (so that short interruptions are not grounds for a rent abatement). When considering the possibility of such interruptions, it is also a good idea for the tenant to consider business interruption insurance (and this is often required by the landlord).

 Barna, Guzy & Steffen law firm has made a strong commitment to serving worthy pro bono clients.

Among the firm’s active pro bono attorneys is Kip Peterson, whose practice focuses on corporate law and business transactions. One of the non-profit corporations Kip has worked with is The Diaper Drive. This organization supports families in need in our community and BGS considers it a privilege to represent this cause.

The Diaper Drive began when Kristen Grode was cleaning out a closet at home and found several packages of disposable diapers her children had outgrown. Kristen set out to research where she could donate the diapers and discovered that there was a tremendous need for such items but no organization existed to fill the need. Just as the recession has increased the demand on food shelves for things to eat, the need for diapers has also grown. In fact, statistics show that 1 in 3 American mothers struggle to provide diapers for their children. However, diapers are not covered by WIC or food stamps.

As the mother of two young children, Kristen recognized the need and began calling friends and family for donations. Before long The Diaper Drive was born. The Diaper Drive collects disposable diapers, sanitary wipes, and other toiletries and distributes them to local food shelves, shelters and other organizations where the items are then provided to families in need. The Diaper Drive relies heavily on grass-roots events like “diaper drives” and spaghetti dinners to collect diapers. There are also collection stations at local churches, grocery stores, and other businesses.

If you are interested in learning more about The Diaper Drive, visit The Diaper Drive.

On January 15th, 2011, The Diaper Drive will hold “The Biggest Diaper Drive in America” in the Mall of America’s Best Buy Rotunda from 9am-9pm. For more information please visit:
Mall of America website.

As a former nurse and now a lawyer for over 23 years, I become a little disheartened when I see what I believe are legitimate insurance claims being denied by medical insurance providers. I understand they need to contain costs and ensure that only tests and treatments that are necessary are covered, so that the ever-escalating insurance premiums do not continue to overburden individuals and especially small businesses. But we pay our premiums so that we have the coverage we need, and insurance companies need to be fair.

The reality is that the insurance policy is a legal contract between the company and the individual that outlines the responsibilities of both parties. Most insurance companies must pay for the reasonable and necessary expenses incurred by the insured and the insured (or her/his employer) must pay the premium.

The policy provides for what is, and is not covered, and there are generally exclusions for some things. The contract will sometimes indicate that some procedures, tests or care needs to be preapproved by the insurance company before you incur the cost. Make sure you know what those things are. When in doubt, get preapproval for all expensive tests or referrals.

Most people understand that when they have paid their premium, they get health care and most do get the care they need. It is that simple. What disturbs me, is when I see a case where the insurance company refuses to pay for a particular test or service and yet the policy does not clearly exclude the care item and the insured did everything they were supposed to do, but are now left to fight with the insurance company over the sometimes very large bill. Often, the insurance company indicates that they have not paid because it is not a covered item, or it needed preapproval or they could argue that it was not medically necessary or is experimental. Sometimes they are wrong. Maybe preapproval was not required or maybe the insurance company had paid for that same test or service in the past and is now refusing, or maybe it is simply a covered item and should not be excluded.

Whatever the reason given by the insurance company for not paying, the problem with this scenario is that the insured is left with a bill from a provider and the insurance company is refusing to pay without a fight. To add insult to injury, the provider many times sends the bill to a collection agency, while the insured is trying to have the matter straightened out with the insurance company. It is one thing if it is a small bill, but what if it is a large bill for thousands of dollars or tens of thousands and the insurance company is not budging on the coverage issue and refuses to pay.

The reality is that because the insurance policy is a contract, it must be analyzed in relationship to the particular care that is being rejected as not covered. You must first determine what is covered under the policy. What was the care or test that is being denied? Is it clear under the policy or is a policy interpretation necessary? Many times there are appeal rights under the insurance contract itself, but you must be careful because many impose deadlines for the filing of such an appeal.

To get the claim paid, sometimes the answer lies in getting complete information to the insurance company. This can be frustrating and involve a lot of time, on hold, to get to the right person. Sometimes it may involve negotiations with the company. Under Minnesota law, the insurance company has an obligation not to engage in unfair practices. These laws are generally enforced by the Department of Commerce. The Department of Commerce has also developed a Health Insurance External Review Appeal process. The appeal entails an application and the filing fee is currently $25. The appeal is performed by an independent company that contracts with the State of Minnesota to review appeals. Its employees and physicians are impartial and separate from the insurance company. They review the situation and give an opinion. It is binding upon the insurance company, but not on the individual. In other words, if they do not find in your favor, you can appeal to a court. You can also start a lawsuit against the company to try to obtain a court order regarding the coverage issues. This case would be one for breach of contract and potentially Declaratory Judgment. In a Declaratory Judgment case you would ask the court to declare your rights under the contract. All court options will be expensive, but sometimes it is necessary to obtain the correct result.

I have assisted clients where the insurance company has denied a claim and the denial appears to be in error or in bad faith. I can represent individuals for an hourly rate to assist them in how to best deal with the denial of benefits and to determine if the insurance contract should have provided coverage. On small claims it may not be cost effective for the client to make the decision to hire us, to assist with those matters, but if the denial involves thousands or tens of thousands, we would be happy to determine whether we can assist in the determination of your benefits.

Joan M. Quade, J.D., R.N.
BARNA, GUZY & STEFFEN, LTD.
400 Northtown Financial Plaza
200 Coon Rapids Boulevard
Minneapolis, MN 55433
Phone: (763) 780-8500
jquade@bgs.com

Joan Quade is a shareholder of Barna, Guzy & Steffen and is the head of the Employment Law and Business Litigation Section. She negotiates solutions to problems that arise in business and/or for individuals.

This article is intended to provide general information only and should
not be used as a substitute for legal counsel or advice.