June 3rd, 2020

Why Can’t New York Be Like Alabama?

If only New York was like Alabama. I can almost see your jaw drop and eyes pop.

But New York has a problem and Alabama has a solution. And we should be all over it.

The problem is bad faith by insurance companies, refusing to settle matters because no one holds their feet to the fire to act in good faith. And that causes a backlog in the courthouse. Under normal circumstances.

Those normal circumstances mean, for example, that if a driver has a $100K policy, and there are $400K in damages, the insurance carrier may simply string the case along.

Why not? What’s their downside? The plaintiff, after all, may be desperate and the longer the desperation goes on the better for the insurance company.

And second, if the carriers figure it will cost the plaintiff $20K to try the case, they see little reason to pony up a $100K policy. If a plaintiff fails to take $80K, for example, and spends $20K trying the case, they could “win” with a jury verdict but be worse off than the lower settlement. So they demand a gift.

And if you take a verdict in excess of the policy limit, you’re generally stuck with the policy plus a judgment to collect the rest. But that judgement is against someone that likely can’t pay (which is why they had a small policy to start with).

Last year I laid out the cockamamie way that New York handles bad faith. Briefly, you have to first spend all the money, then take an excess verdict and then get that person you just sued — who owes your client the balance of the funds — to hire you to sue his own carrier for bad faith. Maybe they will, maybe they won’t, maybe they vanish. And the second lawsuit will tack on a few more years.

Now add in the COVID-19 pandemic. Trials have stopped for months on end (and maybe longer). And a trial is the only way to pressure an insurance company. There is now a shit ton of financially strapped, unemployed people, and no pressure at all on the insurance companies to dispose of cases since no juries are being selected any time soon. The problem of an already-overloaded judicial system is now exacerbated.

Just the other day I wrote how a judge had to order virtual depositions go forward due to intransigence by the defense. The defendants tried to use the pandemic as a tactic to stall, stall, stall the case until a vaccine is available or the pandemic has otherwise abated. Delaying justice and thereby denying it.

Now we turn to Alabama. Like many states, Alabama has an actual bad faith statute. And judges are not amused when carriers play games. Because judges don’t want to see their dockets clogged with cases that can be resolved.

Enter, stage deep south, Circuit Judge Karen Hall of Madison County. I know nothing at all about Judge Hall or her politics, age, race, religion, favorite ball team or anything else. What I do know is that she was not amused at Allstate for playing games in her courtroom. And I know this because she gave an award of bad faith damages well in excess of what the plaintiff actually asked for. (Thank you Kevin Grennan for forwarding me this decision.)

Allstate, you may not be surprised to learn given its presence here in this post, did what The Good Hands People apparently likes to do — stall and make the plaintiff spend money because how dare they bring a lawsuit against it.

There was just a $75K underinsured policy in Harbin v. Stewart, so the plaintiff was proceeding against his own insurer for that underinsured coverage that he paid for. Judge Hall ordered them to mediation with all sides to have someone present with full authority to settle. This was, as Judge Hall noted, a “significant damages case” with over $234K in medical bills alone.

The plaintiff traveled to the mediation along with his wife and lawyer ready to talk. The Allstate adjuster decided to stay home. Worse, while defense counsel arrived, he had no authority to settle. He offered nothing. Nada. Bupkus. The judge was not amused at Allstate’s violation of her order.

So they went to trial. Allstate didn’t even contest liability. In other words, The Good Hands People knew they would have to pay something, there were $234K in medical bills after all, and it still offered zip-a-dee-doo-da.

The jury came back with $690K.

Now this is where New York’s legislature should take note, because some problems in Alabama (and elsewhere) are no different than here. Judge Hall noted that the rules were designed for the just, speedy an inexpensive determination of actions. That same theory, though the actual language may differ among states, permeates every courthouse and judicial system. In essence, don’t waste our time, or that of our citizens who must sit jury duty.

After that $690K verdict, plaintiff’s counsel asked for $5K in costs and $52K in legal fees in addition to the $75K policy.

Nope. Not as per Judge Hall. No way. She would not do that.

Two days ago she walloped them, instead, with a $620K sanction. In doing so she noted that Allstate was a repeat offender. And she needed some way to make its conduct stop.

The requested relief, the court wrote, was “inadequate to accomplish the dual purposes of addressing the burden placed on the Plaintiff and addressing the overarching effects of Allstate’s conduct upon the Courts of Alabama, civil litigants, witnesses, and Alabama citizens who must serve on juries every time Allstate behaves in this fashion.”

You can rest assured that Allstate will not try that trick in her courtroom again.

Now it’s New York’s turn. When will our Legislature give us a bad faith law with actual teeth? We are about to see the Mother of All Backlogs in our court due to the virus. It will be exacerbated by insurance company delays. And if/when we get to trial, injured New Yorkers are left looking at carriers offering 50-70 cents on the dollar in some cases, even when the liability is clear.

How will New York deal with the effects of deliberate insurance company delays upon the courts, civil litigants, witnesses, and New York citizens who must serve on juries every time an insurer behaves in this fashion?

Adding insult to injury, New York is likely to see a massive financial strain due to the virus. Albany may well be increasing taxes and decreasing services to balance the budget. There’s little question the justice system will take a further beating on top of what is going on now.

So dear Legislators, please finally pass a bad faith law. With real teeth. Let the judges start enforcing it.

You have the power to make the backlog disappear, stop bad faith and bring long-awaited justice to those that seek it. And help save the State some money in the process.

The case is here: Harbin v. Stewart

 

June 18th, 2019

Geico Asks for Immunity

New York’s annual legislative session ends Wednesday. And that means, predictably, a mad rush to get legislation enacted without having to wait another year. Or, conversely, a mad rush to stop legislation.

And that’s where we are today, with Geico attempting to halt legislation that would hold it (and other insurance companies) accountable for bad faith in settlement negotiations. Yes, out-of-state-readers, it’s true, New York currently has very limited ways to stop insurance companies from trying to screw you over in your time of distress.

This legislation was first proposed in the wind-swept wake of Hurricane Sandy in 2013, when insurance companies thought it would be a really cool idea to deny coverage for damaged homes. If a policy excluded wind damage, the insurers would claim water was to blame. If it excluded water damage, they would claim wind was to blame.

The denials had a common background – they were dealing with people who had their homes destroyed and were, therefore, in great economic distress. Because everyone needs a roof over their heads. So the denials gave the insurance companies some, let’s call it, leverage.

Delay and delay and force the homeowners to hire lawyers to sue. Then, when the pain is deep enough and the homeowners desperate enough, maybe settle for 50 cents on the dollar. Or 70. But even if the insurers had to cough up 100 cents on the dollar on some claims, so what? That was merely what they had to do anyway. Every cent saved was profit.

And that is part of the base model of the insurance company: Take in as much as you can in premiums and pay out as little as possible and invest the money in the interim.

The legislation that is proposed, that Geico is afraid of, would put a stop to that as well as bad faith tactics in auto policies and elsewhere.

Right now, in an auto case, if an insurance policy is only the bare minimum $25,000 or maybe $100,000, and the damages are $500,000, the insurance company has a vested interest in offering only a portion of the policy. Sure, it’s possible that someone will spend $20,000 and try the case to verdict. But that often makes little economic sense, and all the lawyers know it. You can win but still lose. So why offer the whole policy even if you would, in good faith, owe it?

The only avenue for relief currently is to take an excess verdict against the insured when the insurance company has elected to put its own interests ahead of those customers, because you can’t sue the insurance company directly.

And then, and only then, if the insured is smacked for a big, fat verdict in excess of the insurance policy, there might be some relief. But that relief only comes if the defendants — who you just sued and perhaps, inflicted a bit of anxiety on — then assign their own rights to sue the insurance company for bad faith back to the people that had sued them. And if those people are gone? Or say “screw you, we don’t feel like helping you as we got nothing to take anyway so it doesn’t matter to us?” Well, sorry Charlie.

The bad faith legislation that is now pending would fix this problem, a problem created by the fact they are currently required to act in good faith but there is only one very poor method of enforcement.

Enter, stage right, Geico to oppose this common-sense legislation. In a mass email yesterday from Rick Hoagland, a Geico senior vice president, to its policy holders, it urges people to call their legislators to stop the legislation and protect the insurance company profits.

OK, maybe Hoagland didn’t word it quite that way. He claimed, instead, that legislation protecting both policy holders and the people they may injure would somehow be bad for them. George Orwell would have been proud.

He writes, instead that:

I am the senior vice president of GEICO, your insurance company in New York, and I am writing to ask for your help. The New York State Senate and Assembly are considering multiple pieces of legislation in the next few days that, should they pass, will likely increase insurance premiums for YOU and all New Yorkers, even if you’ve never had an accident.

He doesn’t say it would increase premiums but rather, he speculates. He provides no empirical data. More importantly, he doesn’t tell his insured that the legislation protects them from the bad faith practices of Geico, the company that they paid money to in order to protect them in the event something goes awry. And it is those bad faith practices that could put their own homes at risk in the event of a verdict in excess of their insurance policies.

And, of course he doesn’t tell his readers that the bills are designed to protect them. No, he claims that they “make it easier for trial lawyers to sue insurance companies.”

Here’s an idea, why not just put us personal injury lawyers out of business by dealing in good faith to begin with? Look, Geico I solved your problem! (You’re welcome. No charge.)

Here’s the Geico pitch, compete with links to the bills, which I urge people to read so the they know they are consumer protection bills. The reason he provided links is because he knew, no doubt, that few people would actually click them or get an explanation as to their true purpose:

Assembly Bill 5629-B and its companion bill, Senate Bill 3634-B, along with Assembly Bill 5623 and its companion bill, Senate Bill 6216 , are going to make it easier for trial lawyers to sue insurance companies and will have negative, long-lasting impacts on New York policyholders and taxpayers. (Simply click on the appropriate bill number to link to the text of the legislation.)

The legislation would allow a direct case against the insurance company for bad faith, so that the victims don’t have to rely upon the people they just sued to tender their rights against the insurers.

Geico, of course, would like to make enforcement of good faith laws difficult, thereby giving it a certain level of immunity. Why not offer 20K on a 25K policy when you know it will cost the injured plaintiff that much just to try the case? There’s almost no downside for them for acting in bad faith.

It’s time New York finally put a stop, once and for all, to the bad faith of insurance companies. The law requires good faith dealing and the Legislature should give consumes the tools to enforce it.

The email is here:

 

February 13th, 2018

Aetna’s Death Panels?

When I first saw the story, half of me believed it, the other half not. A former medical director at Aetna testified that he didn’t look at patient medical records when deciding whether to (dis)approve medical treatment.

Yeah, I did a double take also. But now there’s an investigation going on.. As CNN reported,

California’s insurance commissioner has launched an investigation into Aetna after learning a former medical director for the insurer admitted under oath he never looked at patients’ records when deciding whether to approve or deny care.

But it’s actually far worse than that. Because, it seems that the medical director wasn’t going rogue because he was lazy and out playing golf. No. He was actually following Aetna policy by rubber-stamping the recommendations of nurses:

The California probe centers on a deposition by Dr. Jay Ken Iinuma, who served as medical director for Aetna for Southern California from March 2012 to February 2015…During the deposition, the doctor said he was following Aetna’s training, in which nurses reviewed records and made recommendations to him.

The deposition came up as part of a breach of contract lawsuit for denying medical treatment under a healthcare policy:

The deposition by Aetna’s former medical director came as part of a lawsuit filed against Aetna by a college student who suffers from a rare immune disorder. The case is expected to go to trial later this week in California Superior Court.
Gillen Washington, 23, is suing Aetna for breach of contract and bad faith, saying he was denied coverage for an infusion of intravenous immunoglobulin (IVIG) when he was 19. His suit alleges Aetna’s “reckless withholding of benefits almost killed him.”

The treatment was expensive, costing some $20,000 per infusion. And it was covered by Washington’s prior insurer. Aetna is trying to claim that the denial was the young man’s failure to get a blood test. His own doctor, however, said it was medically necessary.

But this was the kicker to his personal story — the medical director who denied the treatment hadn’t actually read the records, had no idea how to treat the disease or what to do:

During his videotaped deposition in October 2016, Iinuma — who signed the pre-authorization denial — said he never read Washington’s medical records and knew next to nothing about his disorder.

Questioned about Washington’s condition, Iinuma said he wasn’t sure what the drug of choice would be for people who suffer from his condition.
Iinuma further says he’s not sure what the symptoms are for the disorder or what might happen if treatment is suddenly stopped for a patient.

Well, so much for the doctor’s oath to “Do no harm.”

To my eyes, this looks like Aetna engaging in a staggering case of insurance fraud, not simply for denying Washington treatment by having a no-nothing doctor doing the denying, but rather, because this was the way Aetna trained him to engage in denials. This was policy.

And if it’s policy, there are many people involved in the conspiracy.

Some years ago, regular readers might remember, there was a lot of hollering and screaming about “death panels” when Obamacare was being debated, in the event government got further involved in health care. That is to say, that treatment would be denied because it was cheaper to let the patients die. That was the political line.

Well, guess what? It looks like we’ve arrived, but it isn’t because of the government trying to save a few bucks. Having insurance panels deny benefits, for the sake of profit, is better?

And you know why Aetna is doing it? Because it’s a publicly traded company that has, at its core, a fundamental duty to maximize profits for shareholders. That’s what publicly traded companies do.

Given that Aetna has 23 million customers nationwide, this scandal is likely to be massive in its repercussions as most surely some have died as a result denials of care — denials that took place without a doctor’s review of the records.  And we go here beyond mere negligence, but to a corporate policy of recklessness with people’s lives.

Perhaps this should not really come as a surprise, however, as I see the same thing happen elsewhere in the insurance industry. It is routine in New York, for example, for victims of car collisions to get cut off from no-fault healthcare benefits based on quickie medical exams that last only a few minutes. And doctors doing “independent” reviews for insurance companies in personal injury cases likewise do these quickie exams to deprive those injured from negligence from recoveries, which was the subject of a multi-part series I did in 2013.

All of this is tied together with a common theme of doctors who went to medical school to care for others now doing the bidding of insurance companies. Because the insurance companies ask for it, living, breathing humans are losing healthcare benefits and rights while doctors allow themselves to be used as cover as they prostitute their services. But prostitute may be the wrong word, as prostitutes don’t act in ways that may hurt or kill their clients as a matter of policy.

Whenever a scandal pops up, the big question is always the same: Who makes the profit? In this case, it is clearly Aetna shareholders. And the doctors who’ve sold their licenses to Aetna in exchange for nice, tasteful, fees.
————

Elsewhere:

An Aetna “Fake Accounts” Level Scandal? Medical Director Admits He Never Reviewed Medical Records Before Denying Care (Smith @ Naked Capitalism):

Even though it is tempting to jump to worst-case conclusions, we’ve seen too often in corporate scandals that that is precisely how things pan out. As famed short seller David Einhorn says, “No matter how bad you think it is, it’s worse.”

 

December 19th, 2017

Cuomo Signs NY’s New Auto Insurance Law

Last night, New York’s Gov. Andrew Cuomo signed legislation that alters New York’s auto insurance law, and it’s a win-win deal for everybody.

While the law sounds uber-wonky, it’s quite important due to a fundamental misunderstanding of how auto insurance works by the general public.

Most folks think that the insurance coverage they choose  — let’s say a 250K limit — will protect them if they’re involved in a collision. But it doesn’t. That insurance only covers other people.

You, the injured driver, must pursue the guy that plowed into you at the intersection because he was checking his texts, through the limits of his insurance policy. And if his insurance policy is only, let’s say, the bare minimum 25K because his job is flipping burgers and he doesn’t really have a pot to piss in, then you with your fractured pelvis are, as we say in the law, shit out of luck.

But wait! There is one small hope for you, and that hope lies in your own policy provisions for getting involved in a collision with an uninsured or underinsured driver. That provision is known here in New York as Supplementary Uninsured/Underinsured Motorist (SUM) insurance.

The problem? The default on your policy was the state minimum, just 25K. And you can’t even collect that if have received the 25K from the guy that plowed into you.

Only a savvy person — or one with a conscientious insurance broker that informed him — would know that you could elect more SUM coverage. Most don’t, because most don’t know. My own legislator wasn’t aware of this whenI discussed this bill with her a few years ago, and found out only when her daughter was injured in a collision and got caught in this trap.

That law is the one that has now changed. Now the default choice is your SUM insurance matches the underlying coverage that you picked. So if you have a 250K policy you will have 250K SUM, and get as much protection for yourself as you are giving to others.

The cost is minimal and people can easily opt out. The thing is, those that are picking more than the minimum amount of coverage are the ones who understand that they likely have the most to lose. That’s why they bought the higher coverage in the first place.

When a bill becomes a law that has no losers attached to it, it’s a win-win all the way around.

I wrote about this back in June when it passed in the closing hours of the legislative session. The vote was 62-1 in the Senate and 104-6 in the Assembly.

People complain often about dysfunctional governments.  But when they get it right we should take notice with a little golf clap in their direction.

 

December 15th, 2017

It Only Affects 14,000 Doctors. And Their Patients.

New York’s largest medical malpractice insurance company is owned by its doctors. But pretty soon, it will be sold to Warren Buffet’s profit-hungry Berkshire Hathaway. And that’s gonna be a problem.

That company is Medical Liability Mutual Insurance Company, which insures over 14,000 New York doctors and is one of the largest such companies in the nation.

And when its doctors are sued for negligence they hire some of the most competent trial lawyers in the city. Doctors, after all, are not shy about demanding the best.

Many of the current gaggle of defense firms were created from the mid-90s dissolution of Bower and Gardner, one of the largest — if not literally the largest — medical malpractice defense firms in the nation.

Unlike BigLaw firms that do “litigation” these folks actually go out and try cases, and know how to do it well. While every large firm has its bad apples, and this biz is no exception, their reputation is, on the whole, excellent.

So what are the ramifications of this sale to a publicly traded company? For doctors? For patient/litigants? For lawyers?

For doctors, I think this is a losing proposition, regardless of the dollars involved when they get bought out, and my reasoning is simple. Currently, MLMIC owes its allegiance to the doctors that own it and run it. But once sold to Berkshire Hathaway, company loyalty shifts to the shareholders. Warren Buffet, after all, is buying this business for the profits it will make for its shareholders. In fact, the very essence of a publicly traded corporation is that fiduciary duty to the shareholders.

It doesn’t matter if you call that profit motive a bug or a feature of capitalism, that’s the way it is. It’s a plain fact that publicly owned companies and privately owned companies owe their loyalty to different constituencies. Wall Street demands profits, and they don’t care too much whose hide it comes from.

How will this manifest itself? First, by trying to trim costs, of course. And part of that will likely mean trying to trim legal fees.

I fully expect to see a new raft of medical malpractice defense firms, who will pitch their business to Berkshire by undercutting the rates of those that currently lead the defense bar. They will try to trim their prices by focusing more on volume, less on quality. And these firms will hire less experienced (cheaper) attorneys to do the work, so that they can give that lower legal rate to their new masters at Berkshire.

And that will be very bad for the docs.

One of the great advantages that small firms have over large ones is that the small firm lawyer generally knows everything there is no to know about a case — every nuance. But when firms do volume, that nuance is lost. The experienced small firm lawyer that sees a constantly shifting parade of big firms come in on a case with inexperienced lawyers has an advantage.

How does this affect the patients, who are now litigants? Well, if the case is part of a volume practice for the defense firm, it is less likely that a savvy defense lawyer or adjuster will recognize the dangers ahead and move to settle the case. The matter gets prolonged.

Now a case being prolonged isn’t always bad for an insurance company, as they make money by investing the float — those premiums that they have taken in but not yet paid out in claims. The insurance business model is, of course, to take in as much as you can in premiums, pay out as little as possible, and invest the money in the interim.

In my younger days, no medical malpractice case ever settled until jury selection, even if a sponge or clamp was errantly left behind. In recent years, however, the insurance carriers have become more savvy and recognized they could get a discount with an early settlement on clear liability cases, and that this discount (along with savings on the legal fees) might well exceed the interest on the float that they might make by stalling. (If interest rates go up, of course, that could change.)

On the one hand, this delay could be very bad for desperate plaintiffs who might not be able to work anymore. The reality, however, is that this scenario is already exploited when possible.  Desperate plaintiffs don’t do as well, in general, as “tell ’em to go pound sand” plaintiffs. The delay tool is used in some cases, but not all.

But once they get to trial, plaintiffs will magically have the driver’s seat. Now there’s  a jury to be reckoned with. The discount factor for early settlement has evaporated, and settlement demands may become more firm, or even rise (as I’ve done on multiple occasions).

My opinions stem, in part, from the fact that Berkshire owns other insurance companies, one of which is Geico. Geico doesn’t exactly enjoy the best of reputations in New York, and on many occasions I think it has put its own insured at risk of excess verdicts due to a refusal to make early good faith settlement offers.

And one would naturally expect the new MLMIC to follow in those footsteps as they will now answer to the same masters. The problem, however, is that an excess verdict means a hell of a lot more to a doctor than it does to a minimum wage worker with a minimal auto policy.

Will the Gecko treat doctors the way it now treats others that it insures? The best guess from my little corner of cyberspace, is yes. I don’t think that selling itself to Berkshire will end well for the doctors.

I would not be surprised at all if, within 5 years, a new medical malpractice insurance company is born in New York, once again owned by doctors, with the interests of doctors as its priority, instead of a bunch of Wall Street traders.

The deal is expected to close in the first quarter of 2018. It was first announced last year.