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 wakes 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 of the 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, 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 — then assigns 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 someone 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 “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.

 

June 23rd, 2017

NY Leg Advances Change to “SUM” Legislation (Updated!)

The last two days I covered action in the New York Legislature to change the medical malpractice statute of limitations and make a modest change in where lawsuits can be brought (both of which still need the signature of the Governor).

Today, I cover a third piece of legislation, which while exceptionally important is virtually unknown to most. These posts come in a flurry because that’s how our Legislature works, passing bills  in a frenzy in the closing days of the annual January-June session.

This particular legislation refers to Supplementary Uninsured/Underinsured Motorist (SUM) insurance.

Stop!!! Don’t leave!!!  Trust me, while the issue sounds boring, it could be the difference between bankruptcy or not to anyone seriously injured.

In New York, we have particularly crappy minimum levels of insurance, known as 25/50 on non-commercial vehicles. That means that, if you are injured by someone with such minimal insurance, no matter how badly, the most you can obtain from that insurance policy is $25,000. (The 50 refers to the aggregate of all claims from the collision.)

And if badly injured, you can’t work and pay your bills. Which is why bankruptcy is not uncommon amongst those victimized. Unless you protect yourself.

Unbeknownst to most folks, there may be a second policy at play — your own — if you own a car. This is the SUM insurance if the car that plowed into you and broke your back has that minimal insurance.

Now here’s the catch, and the reason I write: The default on the SUM policies is a mere 25K. So even if you are a high earner, bringing home the family bacon, and have a $500K bodily injury policy of  your own, it won’t matter if you don’t read the fine print. Because that $500K is only to protect the person that you injure. It isn’t for yourself.

Yeah, it’s in the fine print. Most don’t know about it. Even one legislator I spoke to a couple of years ago was so unaware of it that, when her child was injured, was stuck with that minimal policy. She had no idea.

And, before I get to the legislative fix, one more point. That SUM policy only comes into play if your own policy is larger than the car that hit you. So, in other words, if the car that ran the light and clobbered you had a 25K policy, and you have a 25K SUM policy, you don’t get an extra 25K, because you would only be entitled to the difference between the two.

OK, now on to the fix. The New York Senate passed a bill (S5644A) in the waning hours of the legislative session to change the default from 25K SUM insurance for yourself to be the same as the amount of bodily injury coverage you have selected to protect others.

So if you have a 500K bodily injury policy, your default would be 500K SUM. You can, of course, decline it if you want. But most people who feel the need to buy insurance at higher levels aren’t the types of people who generally would decline.

This bill passed, as had the medical malpractice bill and the venue bill, with wide bipartisan support. And by wide I mean 62 out of 63 votes.

Unfortunately, the legislature adjourned for the session as the Senate passage came too late for the Assembly to vote. It will only come to the Assembly floor if they are called back into session, a possibility given that there is a large, unresolved issue of mayoral control of NYC schools.

Otherwise, it is wait till next year.

In the meantime, if you are renewing your auto policy, look for that part about SUM coverage and make sure you get as much as you can. It is, relatively speaking, dirt cheap, which is why your broker may not even bother to mention it to you. But it can make all the difference in your life if some underinsured car clobbers you.

And one day I’ll come back to discuss our ridiculously low 25/50 auto insurance policies.

Update (6/29/17) – Gov. Cuomo called the Legislature back to Albany for a special session, to deal with the issue of mayoral schools. And any other lingering issues.

So late last night, by a vote of 104-6, the Assembly joined the Senate in passing the SUM bill. It goes now to the Governor for signature.

This is a very big deal, as all too often we see cases of people with decent insurance getting hit by cars with little insurance, and the victims then find out to their own dismay that they could have easily and cheaply covered themselves for this event, but didn’t. Now that coverage will be the default.