Insurance Claims And Issues

Healthcare Cost Managers Reportedly Benefit Exclusive Distributors of Life-Saving Drugs ...

                                        ...  Themselves.

    Employers hire Healthcare Cost Managers, companies which reportedly contract to help employers manage their Health Insurance programs "and get medicines at the best available prices."  Milt Freudenheim, "The Middleman's Markup/Benefits Managers Earn Profits With Exclusive Rights on Specialty Drugs" p.B1, col. 2 (New York Times Nat'l Ed., Saturday, April 19, 2008).

    Some Drug Benefit Managers also have separate contracts with some Drug Manufacturers.  Under those contracts, the same businesses which contract with employers as Drug Benefit Managers, also enter into exclusive distribution contracts with Drug Manufacturers to  sell  expensive specialty drugs. 

    Drugs like this are so-called specialty drugs not merely because of some inherent novelty, but because there is no generic substitute for them.  An example given in the report is an exclusive contract to distribute an anti-seizure drug prescribed for an epileptic child.

    Separate and apparently conflicting contractual duties in these reported situations certainly benefit the Drug Benefit Managers/Exclusive Drug Distributors, and perhaps these situations also benefit the Drug Manufacturers who contract for the exclusive distribution of their 'specialty' drugs.

    However, what benefit is conferred upon employers who pay for Drug Benefit Management, if any?  What positive effect is there upon the employers' own form of self-administered Health Insurance?

    The linked news article does not suggest one.  Perhaps the Managers/Distributors can suggest one or more.  If so, they are invited to leave a Comment. 

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Bankruptcy Sanctioning Standards Ironically Spare Mortgage Lender Bad Faith Sanctions ....

    ... But Do Not Spare It a Reprimand, in a 72 page Decision by a Federal         Judge.

    The complete story of the United States Trustee's Complaints against practices of lenders-litigants in Bankruptcy Court trying to get their money back at any cost is fully explored in Insurance Claims and Bad Faith Law, at www.insuranceclaimsbadfaith.typepad.com.  Here is a recent development, which is also the subject of a parallel post in that space.

  In a 72 page opinion, a Bankruptcy Judge in the United States District Court for the Southern District of Texas has listed many errors by Countrywide Financial Corporation in a borrower's Bankruptcy case, including fees that were allegedly improper or unexplained, a motion to lift a bankruptcy stay that should never have been filed as the Court described it, and negligence.  The Court told Countrywide to reevaluate how it handles the kinds of policies and procedures that were listed in these 72 pages including what the Court itself described as a disregard for professional and ethical obligations.

    However, this misconduct could not be sanctioned as Bad Faith in litigation, said the Court, which felt compelled to apply a standard of "clear and convincing" evidence.  The Court's opinion is so long that it is in two parts, available by linking here:  Download Countrywide_(In_re_Parsley)_decision_(S.D. Tex., Bankr., Opinion Filed 03.05.08).Pages1through40.pdf and here:  Download Countrywide_(In_re_Parsley)_decision_(S.D. Tex., Bankr., Opinion Filed 03.05.08).Pages41to72(end).pdf.

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UPDATE: Cancer, Chemotherapy, Cancellation and Punitive Damages in California Arbitration.

    A previous post in this space addressed an Arbitration Award in a California Arbitration.  The Arbitration of the Insurance issues apparently including Good Faith and Fair Dealing or not, was demanded by the Health Insurance Company, Health Net Inc.  The agreed Arbitrator is a retired California Judge.  The California Arbitration resulted in an Award of over $9.4 Million, $8.4 Million of which was a Punitive Damages assessment against Health Net.  See the post here, on February 25, 2008.

    On February 28, 2008, a follow up newspaper report published in the Los Angeles Times Online seems to call into question what remedies or options, if any, Health Net and its Attorneys may have to appeal or even question the Arbitration Award:  Lisa Girion, "Penalty Cuts Insurer Profit/Health Net Lowers Its Earnings After a Judge Awards $9.4 Million to a Cancer Patient Whose Policy Was Canceled" (Los Angeles Times Online, Thursday, Feb. 28, 2008).

    As the linked newspaper report's headline reflects, Health Net is filing documents with the Securities and Exchange Commission reflecting that the Arbitration Award has lowered its reportable net income for 4Q 2007, from $123.4 Million to $116.9 Million.

    The newspaper also reports that the California Arbitrator has awarded the Policyholder her Attorney's Fees, in an amount to be determined.

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The "McKinsey Report": Behind Allstate's Subpoena Behavior?

    A Bloomberg news report published online on Tuesday, January 22, 2008 adds insight into exactly why Allstate would adamantly refuse to produce documents in response to subpoenas from the Florida Office of Insurance Regulation.

    According to the Bloomberg article, Florida officials and others are "anxious to get hold of a report by New York's McKinsey & Co., a business consulting firm."  Although it is unclear from Bloomberg whether the so-called "McKinsey Report" has ever seen the light of day, it certainly has been seen by Allstate officials, according to the article.   McKinsey was paid by Allstate to come up with claims handling practices that would assist Allstate in denying and delaying the payment of claims, and thus save Allstate money, so the article reflects.  Allstate allegedly used the McKinsey Report as the basis for Allstate's own "Claims Core Process Redesign" by which Allstate intended to reduce paying Bodily Injury Claims by as much as 20%.  See Victoria Slind-Flor, "Allstate, Microsoft, Google:  Intellectual Property (Update 1)" (Bloomberg.com, Tuesday, January 22, 2008).

    If any of those things are true, any one of them would provide very strong motivation to Allstate to keep anything like the "McKinsey Report" under wraps  -- even if that meant the certainty of offending the Florida Office of Insurance Regulation and the chutzpah to run the related risk that the Florida OIR may not be able to do anything about it.

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Arbitrary? Capricious? Katrina?

     Delay or denial of covered claims can give rise to an Insurance Company incurring liability to pay all sorts of penalties, assessments, attorney's fees, and other damages outside of the contract of insurance.  A recent case, pending a motion for reconsideration at the time of this post, contains the holding that whether or not a refusal to pay a Renter's Insurance Claim in New Orleans after Hurricane Katrina is arbitrary, capricious or without probable cause depends on the facts known to the Insurance Company at the time of its action.  Aronson_v. State Farm Fire & Casualty Co. (La. Ct. App. 4th Cir. Case No. 2007CA0573, Opinion Filed October 10, 2007).pdf at page 15 of the linked Official Opinion from the Court's publicly accessible web site; also available by subscription as 2007 WL 3015571 at *7.  The currently available opinion reports the record facts in some detail that supported both the Trial Court's decision and the Appellate Court's decision that in this case, there was an arbitrary and capricious refusal to settle an insurance claim at the time the Insurance Company failed to reconsider its denial of a Renter's Claim after it had been told that it had already paid an Owner's Insurance Policy Claim based on damage caused by Hurricane Katrina to the same duplex in New Orleans.

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Fiduciary Duties Owed in Subprime Major Markdown.

     Worthy reading for navigating today's tempests.  A post today on Insurance Claims And Bad Faith Law Blog, www.insuranceclaimsbadfaith.typepad.com, notes that issues have surfaced in a very influential newspaper report concerning fiduciary duties of corporate boards of directors before and during the subprime mortgage recessionary trigger.

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Pennsylvania Mistakes Do Not Necessarily Mean First-Party Bad Faith.

     In Pennsylvania, Bad Faith claims are made under a Statute, 42 Pa. Cons. § 8371.  Bad Faith is proved by clear and convincing evidence under that statute, a Pennsylvania state law holding that was recently followed in Smith_v. Westfield Insurance Co. (E.D. Pa. Case No. 06.3077, Opinion Filed June 15, 2007).pdf.  See page 10 of the attached Official slipsheet Opinion, linked above.  This opinion is also available as 2007 WL 1740816 (subscription required). In Smith, a First-Party case involving disputes over a Homeowner's Insurance Policy, the Federal Court held that a mistake is not First-Party Bad Faith.  "That the determination may turn out to be incorrect does not mean that it had a dishonest purpose or was made with a reckless disregard for the truth."  Id. at  11.

     It is the majority if not unanimous view in United States jurisdictions, that a mistake, standing alone, is not First-Party Bad Faith.  See Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 9:6 (2nd Edition 1994 & 2007 Supplement), published by West which makes available online access by subscription.

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Homeowner's Insurance Nonrenewal Not Bad Faith Breach in Oklahoma.

     Oklahoma Insurance Law recognizes what its Courts call "the bad faith breach of an insurance contract."  However, this claim or cause of action must involve wrongful denial of a claim, or perhaps bad faith claim handling.  See Stanley_v. Farmers Insurance Co. (W.D. Okla. Case No. CIV.05.622.M, Opinion Filed Oct. 25, 2006).pdf , in which the Federal Court applied Oklahoma law that the conduct of the Insurance Company and the Agent in selling and issuing an Insurance Policy is not the Oklahoma tort of "bad faith breach of an insurance contract."  In the Stanley case, the Federal Court ruled that the Plaintiffs-Policyholders, Mr. and Mrs. Stanley, could not "maintain a bad faith claim based upon [their Homeowner's Insurance Company's] conduct in attempting not to renew the Stanleys' insurance policy."

     A separate aspect of this case is analyzed at Insurance Claims and Bad Faith Law Blog, in the category of, "Bad Faith:  Do You Want Coverage With That?"

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Insurance Issues: Web Log Posts and Insurance News Reports.

     Posting to a web log involves choices I never imagined.  I prefer fact-based and reasoned analysis of Insurance Issues to opinions.  You know what they say about opinions.  Everybody has one of those, also.

     Fact-based and reasoned analysis of Insurance Issues, in turn, involves time.  Lots of time.  That is why most of my posts, and probably all of my early posts here, are detailed.  Some are downright long.  Can you imagine the amount of time it took to write those posts?

     Recently, I have experimented with providing some analysis and still providing facts for readers, but limiting my reporting to newly decided cases and leaving the discussion of overall trends to others for the most part.  This is not unique to me.  Others have noted the distinction between reporting and most 'blogging'.

     One commentator recently wrote a thought-provoking column about the differences between posts on a web log, and reporting news.    Here is a link to "Blogs:  All the Noise That Fits/The Hard-Line Opinions on Weblogs Are No Substitute for the Patient Fact-Finding of Reporters" by Michael Skube (The Los Angeles Times, Sunday, August 19, 2007).

     My readers can make their own minds up about two recent reports which address Insurance Issues, as to where facts might end and opinions begin--if opinions are expressed at all in these recent reports in two different media.  Here is a link to Bloomberg.com for an article by David Dietz and Darrell Preston, "Home Insurers' Secret Tactics Cheat Fire Victims, Hike Profits" ("Last Updated August 3, 2007").

     And here is a link to the Friday, August 17, 2007 broadcast on NOW on the Public Broadcasting System:  "Home Insurance 9-1-1".

     Which one, either, or both displays the facts vs. opinions?

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Suit for Alleged Breach of (First) Settlement Agreement.

     It appears that a settlement of many filed and potential CatClaims resulting from Hurricane Katrina in Mississippi has blown up.  There was once a settlement agreement, among many policyholders and State Farm.  The proposed settlement agreement was subject to Federal Court approval.  The Federal Judge found wrong in the proposed settlement and refused to approve it.   State Farm then reportedly reached a settlement agreement of many of the same claims with the Mississippi Insurance Commissioner's Office.  This lengthy previous history was summarized in "Update to the Update:  New Settlement in Mississippi," posted here on March 20, 2007.

     It is now reported that through its Attorney General, the State of Mississippi filed suit on Monday, June 11, 2007 in Mississippi State Court.  The Complaint alleges that State Farm breached the (first) settlement agreement and thus breached a contract, claiming compensatory and punitive damages. As of the night of June 11, 2007, there is a temporary silence on the subject on the web sites of both the Mississippi Attorney General and the Mississippi Insurance Commissioner.

     Here is a link to State Farm's Press Release of June 11, 2007,which State Farm entitled "Mississippi Attorney General's Lawsuit Threatens to Disrupt Hurricane Katrina Settlement Process with MIssissippi Insurance Department". 

     There will be more to come on the settlement (or not) of Hurricane Katrina CatClaims in Mississippi, and elsewhere, there can be no doubt.
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