Alternate titles: “Two year wild goose chase” or “Nobody messes with insurance companies!”

After two years of investigation and months preparing an indictment, a huge fraud case against an even bigger insurance company went away - and it only rated page A3 in the Herald Leader: “Sensitive fraud investigation is shut down”. Oh, most likely this poor, underpaid federal prosecutor simply had excess time on his hands so he had some fun badgering the ever innocent insurance company. Those far more cynical than I speculate a conspiracy to block the case from going forward.

Essentialy, prosecutor David Maguire, in May of ‘06, had felt:

strongly enough about his case to prepare a draft indictment accusing executives from a Virginia insurer, Reciprocal of America, of concocting a series of secret deals to hide its losses from regulators. Although he didn’t name anyone from Berkshire Hathaway’s subsidiary, he described the company as a participant in the scheme.

Maybe that feeling was just gas and it passed. The conspiracy minded saw it thusly:

Gober, a government-contracted investigator, concluded that the Justice Department had buckled under pressure from defense lawyers. Shortly before Maguire was removed, his supervisors were urging him to drop the case against General Reinsurance, Gober said.

Gober’s suspicions were fanned by allegations of politicization in the Justice Department after nine U.S. attorneys were fired. He took his complaints to the Office of Professional Responsibility, which investigates Justice Department misconduct.

“It just stinks,” he said. “You don’t come in out of nowhere and in no time kill three years of sophisticated effort.”

All I know is that two of my neighbors are getting entirely new roofs compliments of their home owner’s insurance while my insurance company won’t even replace the whole side of vinyl siding despite the quarter sized holes scattered about its surface (they seem to believe I can match 20 year old vinyl). Now, I realize this is not directly connected to reinsurance companies, except that it makes me wonder - hmmm, maybe there is a conspiracy after all.

In the spirit of forgiveness:

Since todays theme appears to be on forgiveness, I wanted to note that some states have passed or are passing “I’m Sorry” legislation . It generally seems like a good idea. I was told repeatedly in Law School that anytime an injured person says, “It isn’t about the money”, then you could be sure it was about the money. Actually, I was taught it was ALWAYS about the money. I suspect that at some point in an injured person’s attempts to make sense of what has happened and get some sense of justice, it does become about the money. I am not yet jaded enough to believe it is always about the money.

Mistakes happen in any professional service industry. This includes the medical field. However, not all mistakes are due to negligence. Also, not all bad outcomes are due to mistakes.

The “I’m Sorry” is very appropriate for when a bad outcome happens absent mistakes or when a mistake has occurred, but it was not one that amounts to negligence. I suspect that a sincere expression of empathy and compassion, plus an explanation, would go a very long way to resolving complaints. It would have to happen early on, before the injured person’s heart is hardened with anger. When there was actual negligence, a case will not turn on whether or not the physician offered an apology. There will be records and experts testifying. So, there does not appear to be much of a downside to this type of law. I’ll vote for it!

What exactly does insurance insure?

Check out this excellent article at Kentucky Law blog regarding the insurance industry. It confirms some of what I wrote a few months back here.

Look before you release!

Here is a post that could help prevent the inadvertent loss of a claim by settling and releasing with one party: (click here)

“The key in looking at when a release of an employee also releases the employer is determining whether the suit against the employer is based on vicarious liability or if there is an independent claim of negligence. In this case, the only claim against Little Ceasar’s was based on vicarious liability even though it was framed as negligence in hiring. An attorney needs to carefully analyze the real basis of the different claims before entertaining a release of any party.”

While I encourage settlement as the most trustworthy way to approximate justice, settling too quickly and without a careful assessment can also preclude justice.

ENOUGH ALREADY!

As I read Hamilton Mutual Insurance Co. of Cincinnati v. Buttery, 2005-CA-000233-MR & 000426-MR (January 26, 2007)(To be published) out of the Kentucky Court of Appeals I was dismayed by the horrendous conduct of the insurance company and how long the process dragged on. I’d bet the insurer suffered little actual economic loss because they had time to invest the monies and reap the interest. Plus, they get to deduct these damage awards from their tax liability.

The home of this fellow, Buttery, was burglarized and vandalized in 1998. The adjuster who came out told him he would have the insurance money withing 10 days. I guess this insurer felt godlike where a single day is like a year and a year is like day becuase it is 2007 folks!

Buttery was asked to complete and submit claim forms. Although his homeowner’s policy provided for the more generous replacement value of the items taken or destroyed, Hamilton Mutual instead provided Buttery with claim forms to recover the actual cash value of the lost items without advising Buttery that his policy covered replacement value for losses. Buttery completed and submitted the proof of loss forms within twenty-four hours. . . .

In seeking compensation for the loss, Buttery ultimately submitted a vast amount of paper work and documentation, including: three proof of loss statements; all the receipts that he had for the stolen or destroyed items; written estimates that he had obtained for the cost of repairs to his home; and his tax returns for the previous five years. Buttery also appeared for four examinations under oath conducted by Hamilton Mutual. When he sought to present his accountant for interrogation, Hamilton declined an interview. Buttery claimed that he had sustained a loss of nearly $58,000.00. Nearly a year after the loss, Hamilton Mutual had not yet satisfied any part of the claim. Buttery filed suit. Following a jury trial, judgment was entered in favor of Buttery in the amount of $57,375.47. . . .

In an opinion rendered on June 8, 2001, a panel of this court unanimously affirmed the judgment. Hamilton Mutual then filed a motion for discretionary review in the Supreme Court, which was denied on June 5, 2002. Nonetheless, Hamilton still refused to comply with the judgment. Buttery had to file a motion in the trial court for forfeiture of Hamilton’s supersedeas bond. At long last, after more than four years, Buttery received payment for his claim. By that point, Buttery had incurred more than $28,000.00 in fees and expenses . . . .

In June 2001, Buttery filed this bad faith action against Hamilton Mutual. A jury trial was conducted in October 2004. After considering the evidence presented to explain Hamilton Mutual’s delay in paying the claim made under the homeowner’s policy, the jury returned its verdict in favor of Buttery. The jury found that Hamilton Mutual lacked a reasonable basis to refuse payment of Buttery’s claim and that it either knew that it lacked such a basis to refuse payment or that it acted with reckless disregard as to whether such a basis existed to justify its refusal to pay. The jury also found that Hamilton Mutual had violated nine separate provisions of Kentucky’s Unfair Claims Settlement Practices Act, Kentucky Revised Statutes (KRS) 304.12-230 (“UCSPA”). Buttery was awarded $251,003.05, including punitive damages; $12,737.17 in prejudgment interest; and an additional $27,102.64 in attorney’s fees.

Thankfully, the Court of Appeals agreed that the insurer’s behavior was outrageous and affirmed the decisions out of the Knox County Circuit Court. DO YOU KNOW WHO YOUR INSURER IS?

$1.7 Million Sponge

A jury in Lexington recently returned a verdict of $1.7 million to a woman because of sponges left in her during a surgery and the resulting complications.  See Lawreader for more details.  This large verdict is unusual for Lexington, Kentucky.  What struck me more, however, was that the nurses were held liable along with the hospital, but not the physician.  Now I know that what we learn in law school is not necessarily how things work in the real world, but what happened to the physician being the captain of his surgical ship?  In a surgery, the surgeon has traditionally been held responsible for the actions of the nurses and technicians because he has absolute control over what they do. 

This struck me more than the size of the verdict because my lovely wife is a nurse.  I don’t know the specifics but I seriously doubt these nurses carried their own liability insurance.  Physicians carry liability insurance because they have traditionally been the parties held responsible as the professionals.  I also seriously doubt these nurses retained their own counsel.  They most likely relied on the attorney’s representing the hospital and retained by the hospital’s insurer. 

It is even more highly unlikely that the nurses have any resources to begin paying such a verdict.  Most likely the hospital’s insurer will cover the verdict entirely (pending appeals).  However, insurer’s do have a habit of trying to minimize their exposure.  I would recommend that nurses get their own liability insurance, but I suspect few could afford the premiums.  I would also recommend nurses contemplate hiring their own attorney in situations like this, at least to ride shotgun and look out for their specific interests, rather than trusting entirely in the hospitals defense.  Again, this may be cost prohibitive.  I will be anxious to learn if the nurses are left to pay any part of this verdict or if there are other ramifications, such as job loss.  Then they will need counsel.

My heart goes out to the woman who was injured and I don’t disagree with her being compensated.  It is just that my heart also goes out to the nurses involved who are rarely treated as professionals by the physicians, who are not paid as professionals, but who have been left holding that professional baggage in this instance.

Spend a Little - Save a Lot

Two situations I encountered this past week really drove home how valuable it is to obtain a little professional advice before agreeing to something.  For privacy reasons I can only say that both of them signed away something very valuable without realizing it.  I am sure that if someone had suggested to either of them that they should consult an attorney first, their first thought would have been that the expense was too great for something that seemed so simple.  That is what most people would think.  It is something I would have thought too prior to going to law school.  Now, though, the cost to each one has grown exponentially because they are either paying to clean up the mess or have lost a right forever.

If I can convince just one person out there that it is cost effective to get legal advice on the front end of a deal, then I will be content.  This is especially true if you can locate a reputable solo practitioner or small firm.  There are a few reasons for this.   First, a solo practitioner will personally look over your circumstances rather than relegating down stream to a new associate or law student that is clerking for the firm.  Second, most solo practitioners and small firms have lower hourly fees because of their lower overhead.  Lastly, the solo’s and small firms are interested in long term business, even the small stuff, so they are more likely to give your issue the attention it deserves.  Even if they do not have the answers when you first talk to them, they have the know how to get those answers. 

Seriously - most solo’s and small firm attorneys can look over a release form, contract, or custody papers in half an hour.  In Kentucky, that would be anywhere from $75 to $100 dollars for routine issues (perhaps more for specialized issues).  That is far better than having to pay for many, many hours of legal help in trying to fix a matter once it has gone sour. 

I want to doubly emphasize this if you are an individual and the other party to the contract is a corporation such as an insurance company.  They have already spent thousands and thousands of dollars to lawyers with the end resulting being release forms and contracts that give them maximum protection and you minimum wiggle room.  So, spend a little on the front end and save a lot in the long run.

Insurance: Barrier or Boon

I have had a number of interactions recently where insurance played a prominent role.  These events left me pondering whether insurance in general has begun to make justice more elusive rather than further justice by compensating injured individuals and indemnifying losses. The best answer I can come up with is “yes and no”. That is, some companies (hopefully only the fringe) have crossed that line.

The most personal of these events has been my attempts to replace my health insurance with a plan coupled with a health savings account (which was promised to be the solution for many hard to insure folks).  For a man just hitting his stride in life (my euphemism for middle-age), I am in quite good health.  I work out, have never had or required surgery, don’t smoke, and have no significant health issues other than being a little robust-sized (my euphemism for “big boned”). 

Despite this, I have been precluded from getting this new health insurance because my HDL (good cholesterol) was low in 1998 - eight whole years ago!  My overall cholesterol was fine and the LDL (bad cholesterol) was in the healthy range.  In retrospect, getting my cholesterol checked at all may have precluded me from being insurable on these HSA private plans now.  It struck me in a very personal way how insurance companies attempt to only insure those persons or entities that don’t really need their coverage. 

I can’t really argue with the logic.  Their profits will be maximized by selling coverage where they will least likely have to pay out significant sums.  To that end, elaborate applications and unfathomable contracts have come about that allow them to either weed out the naive and honest or refuse to pay claims on those that fibbed in the application process.  Based on how much I have paid for health insurance in the past and how little they have had to pay for my health costs, I would say that I would be a good investment for them. But, they only use the past to predict the future and what risks might lurk there.

A more concerning event occurred during my stint at an insurance defense firm. One of the carriers of professional medical liability insurance had one of the partners drive the new associates three hours each way to have lunch with some of the claims representatives.  It perplexed me as to why they would demand this day long (non-billable) trip before any of the new associates could handle their business.  Did they only want pretty people doing their work?  Was there some kind of secret blood oath involved?

The lunch was casual with very little actual business talk.  It dawned on me later, though, that the one message each of the representatives echoed to whichever attorney sat near them was how their company would spare no expense in pursuing any possible defense to coverage.  This insurer refused to ever settle regardless of how clear the negligence, causation and damages and they wanted to judge our reactions to this company line in person.

I hate to admit that I failed the test.  I failed it because they approved me to work on their cases.  I like to think that if I had realized up front what the meeting was about, and had time to figure out how to put my reaction into words, then I would have challenged this mindset even though it would have hastened my exit from the big firm world.  I think an insurance company selling policies promising to cover the medical professional, who is liable for damages, but that has no intention of ever paying without a fight, is unconscionable. 

I do understand insurers litigating cases where there are strong doubts about a breach of duty or causation.  I think they have a duty to their shareholders to protect against paying such tenuous claims.  But to refuse to pay up when those issues are only weakly debatable is a breach of contract.  I don’t mean a breach of the convoluted legalese designed to give the carrier maximum loopholes and the insured or third parties minimum protection.  I mean the basic contract of “We will cover you by paying the injured person when you slip up and you pay us thousands of dollars in premiums each year.” 

In avoiding this voluntarily assumed contractual duty, the insurance carrier shifts their costs onto many other parties.  The physician may not realize the cost to them of fighting out every claim until they have to give up a week of practice to prepare for and attend a trial.  They may also be unaware of the potential for a judgment in excess of their coverage.  The courts are burdened by the additional motions and trials.  The major loser is the injured person whose life is held in limbo for years while the tactics on either side slow justice down to a crawl.  The general, taxpaying public also pays because of the strain on the resources of the court but also because many injured persons must turn to Medicaid, SSDI and Medicare while waiting for the judgment. 

I want to repeat that I am not talking about the cases of outright fraud or where there was just a bad result despite the medical professional doing everything they could.  There are a number of suits brought because of bad results even in the absence of a breach of the standard of care.  I am speaking of the cases where negligence and causation can reasonably be attributed to the care given and yet the insurers balk at compensating the injured person.

I am also not speaking of the insurance carriers that do an excellent job of evaluating claims and participate in negotiations in good faith. Without these insurers, the costs of injury and loss would usually remain on the injured party because there would be no other adequate source of compensation. These insurers will engage in the process of mediation which can approximate a just result quicker with less expense than a trial.

Anyway - to bring this tirade to a close. How can we reign in the extreme companies and make them more accountable?  Do we need to nationalize insurance regulation?  Are there alternatives to traditional insurance that can put market pressure on these companies?  Some religious organizations are beginning to flourish that provide alternatives to medical insurance for members of their faith and I suspect the health insurance companies are taking note (see these articles http://ctlibrary.com/9928 and http://www.insurancejournal.com/news/southeast/2006/10/30/73618.htm).  These groups include Medi-Share, Christian Brotherhood, Blessed Assurance, and Samaritan Ministries.  There are likely others reflecting other religions.  Perhaps there are other alternatives as well.  Mostly though, I hope I (and everyone) can be more confident and quicker to challenge an extreme company line and encourage just resolutions.