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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Florida Laws and Hurricane Deductibles: Damages or Declarations.

     Florida has a lengthy statute which addresses Hurricane Deductibles. The Florida Statute, Sub-Section 627.701(4)(a), applies to policies issued or renewed on or after May 1, 2005. This effective date reflects the Florida visitation in 2004 of Hurricanes Charley, Frances, Ivan and Jeanne, and the 2005 visitation of Hurricane Wilma. This lengthy Florida Statute has now given rise to 5 lengthy Federal Court opinions. Any discussion of the statute and these cases is difficult, and a short discussion runs the risk of leaving out something important. This discussion will be kept as short as possible in this post in order to point out how the Florida Legislature and at least 5 Federal Court rulings in Florida have so far treated the recent use of Hurricane Deductibles.

     The Florida Hurricane Deductibles Statute requires certain language in specified pitch or points:

Any policy that contains a separate hurricane deductible must on its face include in boldfaced type no smaller than 18 points the following statement: THIS POLICY CONTAINS A SEPARATE DEDUCTIBLE FOR HURRICANE LOSSES, WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU." A policy containing a coinsurance provision applicable to hurricane losses must on its face include in boldfaced type no smaller than 18 points the following statement: "THIS POLICY CONTAINS A CO-PAY PROVISION THAT MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU."

     Personal lines residential property insurance policies containing a separate Hurricane Deductible and that are subject to the Florida Statutes, must also comply with the following requirements of Sub-Section (4)(b) of Section 627.701:

Beginning October 1, 2005, for any personal lines residential property insurance policy containing a separate hurricane deductible, the insurer shall compute and prominently display the actual dollar value of the hurricane deductible on the declarations page of the policy at issuance and, for renewal, on the renewal declarations page of the policy or on the premium renewal notice.

These statutory provisions have caused a Hurricane of Judicial interpretation in 5 reported rulings by 3 Federal Judges. All 5 available rulings have been made in Federal Cases in the Southern District of Florida.

Mississippi Claims Handling After the Complaint is Filed

     Reviewing cases decided under Mississippi substantive law quickly reveals some simple truths.  Claims handling that occurs after a Complaint claiming Coverage is filed, can subject the Insurance Company to liability.  This holding was announced by the Mississippi Supreme court so "long ago" that its decision is not available on its web site:  Gregory v. Continental Insurance Co., 575 So. 2d 534 (Miss. 1990).  That case involved a Claim for business loss Damages allegedly caused by Hurricane Elena on September 2, 1985.  All Courts in Mississippi from the Trial Court to the Supreme Court exonerated the Defendant in that case against any claim that it mishandled the Policyholders' Claim before suit was filed.  However, it was a different story after suit was filed, according to the Mississippi Supreme Court's holding:

An insurance carrier's duty to promptly pay a legitimate claim does not end because a lawsuit has been filed against it for nonpayment.  Put more bluntly, if you owe a debt the duty to pay does not end when you are sued for nonpayment of it.

Id. at 541.

     Among other things in the present age post-Katrina and post-Rita (among other posts-), a Federal Court in Mississippi holds that this means that Policyholders "are entitled to take discovery concerning the handling of their claim, both before and after the filing of the complaint."  Odom_v. Armed Forces Insurance (S.D. Miss. Case No. 1.05CV669, Opinion Filed Aug. 31, 2006).pdf at page 4 of 5 in the Official Report linked here.  An Order of Dismissal was entered in this case on December 21, 2006, according to the Court's online docket, following the parties' announced settlement of all claims.  The linked opinion including the page with the above quotation is also available by subscription as 2006 WL 2541599 at *3.

     Further, even after the Policyholders file their Complaint for Coverage, the same Federal Court in Mississippi holds that there is a continuing duty of Good Faith and Fair Dealing which includes acting reasonably "in investigating and paying legitimate claims".  That continuing duty "requires an insurer to take into consideration any new information that comes to it through its own investigation of a claim whether or not a suit has been filed."  Broussard_v. State Farm Fire & Casualty Co. (S.D. Miss. Case No. 1.06CV6, Opinion Filed Jan. 17, 2007).pdf at page 4 of 4 pages of this linked Official Opinion; the opinion is also available by subscription and this particular quotation can be found as 2007 WL 113942 at *3.  The Court's online docket shows that the Broussard case went forward after this decision was issued, and that a Notice of Appeal was thereafter filed.  An appeal is apparently pending in this case at this time.

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Expert on Cause of Damages Disqualified in Texas.

     "An expert who is trying to find a cause of something should carefully consider alternative causes."  Wyndham_International_Inc. v. Ace American Insurance Co. (Tex. Ct. App., Dallas, Case No. 05.04.01443.CV, Opinion Filed March 10, 2006).htm.  The Plaintiff in this case proffered a single Expert on the issue of its Damages.  The Plaintiff, Wyndham, claimed business income loss exceeding $66,000,000.00 in this case, which Wyndham attributed to the events of 911.

     As a result of the four hijacked commercial airliners that flew into various buildings and a field on that date, Wyndham claims that it lost many hotel bookings.  Its one Expert on its Damages Claim did not take into account evidence of rebookings, or "any other causes which could have affected Wyndham's profitability," according to the Texas Appellate Court.  The Court affirmed the Trial Court's Orders Excluding this Expert Witness and as a consequence Dismissing the Claim, since there was no other Witness nor Evidence of Damages.

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Allegations, Property Insurance Claims and Litigation.

     It seems like an allegation made by one party often assists another party in the same litigation on an issue arising later in the lawsuit, whether in Property Insurance litigation or in any other kind of lawsuit.  Last Saturday, April 21, 2007, I touched on this during my Powerpoint presentation to the American Bar Association at Amelia Island, Florida on Property Insurance Claims Litigation.

     This post provides you with two recent Federal cases involving Homeowners Property Insurance Coverage issues, because together these cases show how allegations can sometimes assist either the policyholders or the Property insurance company.

     Both new Federal cases involve a motion to remand after the policyholders' lawsuit was filed in State Court  on claims for Insurance Coverage, Bad Faith, and Punitive Damages or "penalties".

     In Jack Punzak & Janet Punzak v. Allstate Insurance Co. (E.D. Pa. Case No. 07-1052), on April 16, 2007 the Court granted the policyholders' motion to remand back to State Court in this case of Federal diversity jurisdiction.  Among other things the amount in controversy in a diversity case must be in excess of $75,000.00 exclusive of interest and costs.

     Although this lawsuit was removed from State Court on the basis of unchallenged 'speaking denials' to requests for admissions, the District Judge held that those denials were trumped by the policyholders' allegations in their State Court Complaint that "[t]hey seek compensation for the property damage, as well as punitive damages, counsel fees and costs, 'in an amount not in excess of $50,000.00.'  Compl. at 8."  Here is why.

     The Federal Judge explained that the policyholders' State Court Complaint was filed in Philadelphia County in the Court of Common Pleas, a Court which provides by local rule for compulsory arbitration in cases where damages are claimed for not greater than $50,000.00.  Thus, when the policyholders alleged that their claims were for not greater than $50,000.00, they were required by Pennsylvania law to allege a figure for which they claimed damages at the time they filed their lawsuit in Philadelphia County, if they sought compulsory arbitration short of extended litigation.  The Federal Judge pointed out that compulsory arbitration, and authorization for local court rules, is provided by Statute in Pennsylvania involving cases in which such damages are claimed in amounts not greater than $50,000.00.

     Accordingly, the Federal Court in this case granted the policyholders' motion to remand:  "Pennsylvania law, therefore, gives legal effect to the ad damnum clauses in the Punzaks' complaint."  Here is the April 16, 2007 Order in the Punzak case:   Download Punzak_v. Allstate Insurance Co. (E.D. Pa. Case No. 07.1052, Order of April 16, 2007)..pdf

     In John "Jack" Dee v. State Farm Fire & Casualty Co. (E.D. La. Case No. 06-7984), on April 11, 2007 the Federal Judge denied a policyholder's motion to remand.  The policyholder's complaint, said the Court in that Order, was "not clear" and was "vague" to the extent that the policyholder might assert claims for damage for "improper adjustment", i.e., claims handling, under a Flood Insurance Policy issued by the insurance company defendant.  The Federal Court did not specifically mention the claims for Bad Faith and "penalties" asserted in the State Court Complaint in that case.  The Federal Judge's ruling in denying remand to State Court, was premised on what the Federal Judge saw as an inartfully worded State Court complaint that could affect the administration of Flood Insurance claims:  "Therefore, the Court finds original exclusive jurisdiction exists pursuant to the NFIA [National Flood Insurance Act]."  Here is the April 11, 2007 Order in Dee:  Download John.Jack.Dee v. State Farm Fire and Casualty Co.  (E.D. La. Case No. 06.7984, Order of April 11, 2007)..pdf

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Update: Settlement Withdrawal in Mississippi.

     UPDATE:  The Settlement is in the Details, or, Show Me The Facts.

     Posts on this page reported on January 24 and January 27, 2007 how the proposed settlement of Hurricane Katrina CatClaims in Mississippi Federal Court left a lot of questions unanswered.  On Wednesday, March 14, 2007 it is being reported elsewhere that at least some of the parties are pulling the plug on this proposed settlement.  A search of the online docket for the Federal Court does not show papers filed after March 9, 2007.  As and when a link is available to relevant and material -- a well-worn phrase -- papers filed in Court, it will be linked here.
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Punitive Damages Re-assessed.

     The assessment of Punitive Damages in the Broussard Federal case in the Southern District of Mississippi has been reduced by 60%.

     As posted in this space on January 12, 2007, a Jury assessed $2,500,000.00 in Punitive Damages in that Hurricane Katrina - First-Party Bad Faith case.  The Federal Judge, Senior Judge L.T. Senter, Jr., entered an Order on January 31, 2007 which reduces the Punitive Damages to $1,000,000.00.

     The Federal Court's Order is based on a Mississippi statute and the United States Constitution.  The Federal Court  "recognizes the factors established in Miss. Code Ann. § 11-1-65, but is also cognizant of due process considerations under the United States Constitution."  Page 3 of Order entered January 31, 2007 in the case of Norman J. Broussard and Genevieve Broussard v. State Farm Fire and Casualty Co. (S.D. Miss. Case No. 01.06CV6).

                                                         Please read Disclaimer.

The Jury Pool for Katrina Coverage Lawsuits

    In any lawsuit, the Venire must be considered by the parties.  The Venire is the list of potential jurors, the potential jury pool, the group from which a Jury will be selected at Trial.  In Mississippi, most individuals did not have Flood Insurance as was true across all of the Gulf Coast before Katrina.  However, many people in Mississippi as well as other States did not have Homeowner's Insurance or Property Insurance either.  They are left to counter the devastation left by Katrina either with the help of volunteers, or by waiting for Government assistance God help them.   See this news article published today for a fuller description of their situation:  Peter Whoriskey, "As Aid Lags, Volunteers Shoulder Rebuilding on Gulf Coast/Local Gratitude Mixes With Frustration Over Government's Failures" (Washington Post,  Sunday, January 28, 2007, p. A03).

    The Venire must be carefully considered in any case, and in no lawsuits should the Venire -- the Jury Pool -- be given more careful consideration than that available to decide fact issues in the Katrina Damages lawsuits.

    A recent case that went to verdict in Mississippi, in which the Trial Judge directed a verdict on Coverage for the apparent Policy Limits and in which a Jury assessed Punitive Damages of $2,500,000.00 was previously posted here on January 12, 2007.  A more detailed discussion of it is also posted today, and on January 15, 2007, on Insurance Claims and Bad Faith Law Blog.

 Please see Disclaimer.

The Settlement is in the Details, or, Show Me The Facts.

     On January 24, 2007, I wrote on this site about the prospective State Farm global settlement of Mississippi Katrina-related Claims.  The potential global settlement heads to a Federal Judge for approval and facts need to be known, I wrote.  On  Friday, January 26, 2007, Senior Judge L.T. Senter, Jr. -- the Federal Judge in question -- issued an Order denying approval because the parties did not present enough facts to allow him to approve their settlement.  Here is a link to Judge Senter's Order: Dennis R. Woullard and S. Imani Woullard, et al. v. State Farm Fire & Casualty Co. (S.D. Miss. Civil Action Case No. 01.06.CV1057, Order January 26, 2007).

      And here is a link to a news report about the Judge's Order and some of the specific questions concerning the proposed settlement arrangement:  Joseph B. Treaster, "Judge Puts Settlement in Question" (New York Times, Saturday, January 27, 2007, page B1, col. 6).

     If this global settlement is finally approved by Judge Senter in the U.S. District Court for the Southern District of Mississippi, it bears reminding that all the Insurance Coverage Questions and arguments pretty much remain pending against every other Property Insurance Company and Homeowner's Carrier in Mississippi, not to mention that the Questions and arguments of Insurance Coverage for Damages caused by Katrina and later Hurricanes remain pending against every Insurance Company in Alabama, Louisiana, Texas -- and anywhere else outside the territory of this potential global settlement that has been proposed in Mississippi.  Many Insurance Coverage Questions and Arguments were analyzed, with available case law, in an article I wrote shortly after Katrina struck.  That article was published by the American Bar Association in the Property Insurance Law Newsletter.  Here is a link to it:   "Flood Exclusions, Hurricanes, and Theories of Insurance Coverage" published by the American Bar Associaiton, Tort Trial & Insurance Practice Section, Property Insurance Law Committee Newsletter 7 (Fall 2005).

                                                                 Please read the disclaimer.
 

Settlement of Many Katrina Claims in Mississippi.

 A settlement announced yesterday in Mississippi will resolve many claims and lawsuits there that were filed after Katrina.  The global settlement in Mississippi will apparently have no effect on Katrina claims and lawsuits pending in other places including in New Orleans, in the rest of Louisiana, or in Alabama.  Here is a link to today's solid reporting by Joseph B. Treaster, "Big Insurer Will Pay 640 Katrina Claims and Reopen Others"  (New York Times, page A1, col. 6, Wed., January 24, 2007).  State Farm is the "big insurer" in this news report.  Based on this report, here is a list of what State Farm will pay and what it will apparently get in this global settlement.

    The Insurer will pay:

• $80,000,000.00 to settle 640 Mississippi lawsuits.  This figure is reported to include the full value under each policy of 300 homes evidenced only by a slab and nothing else on the site after Katrina, and also including various amounts in partial payment toward another 340 other homes for which the Claims showed a range of damages apparently falling short of complete destruction.
• A reported minimum of $50,000,000.00 on previously closed Coverage Claims which will now be reopened, with reported estimates as high as $600,000,000.00.
• $46,000,000.00 more in attorney's fees to the attorneys representing the Policyholders whose Claims are included in this global settlement.

    Here is what State Farm reportedly will receive as a part of this global settlement in Mississippi:

• Dismissal and Releases of the 640 Claims in suit.
• Presumably, Releases as well on all reopened and amicably paid Claims.
• Dismissal of Criminal Proceedings commenced by Mississippi Attorney General Jim Hood.
• Dismissal of a Civil Suit filed by General Hood.
• Unclear approval of the Mississippi Insurance Commissioner, George Dale, presumably being the Commissioner's agreement to the settlement of the 640 lawsuits filed by Homeowners and others.

It is unclear at this moment whether the Mississippi global settlement includes any Businesses.  Further, it is reported in the above newspaper article that the Federal Judge assigned to many of the Katrina Claims filed in Mississippi is being asked to approve the terms of all or part of the global settlement.  More facts will become known soon, in all likelihood.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.