Claims And Issues

And A Little Child With Autism, Shall Lead Them.

     Jacob Micheletti was 3 years old when he was diagnosed with autism.  His father, Joseph Micheletti, an employee of the State of New Jersey, belonged to the State Health Benefits Program.  As the intermediate appellate court in New Jersey would later declare:  "All authorities agree that treatment [of autism] should commence as early as possible."    Following the diagnosis  of Jacob's autism, Joseph Micheletti filed a claim for speech therapy and for occupational therapy for Jacob.  New Jersey law makes the Program the equivalent of private Health Insurance for the same Coverage.

     The State drafted two Exclusions, however, which it put in its Members Handbook, excluding (1) "[t]raining in the activities of daily living," and (2) services or supplies "[t]o promote development beyond any level of function previously demonstrated."  The Program Administrator initially determined that speech therapy was covered for Jacob, but that occupational therapy was not covered.  Ultimately, the New Jersey State Health Benefits Commission ("SHBC") reviewed all Coverage determinations and decided that both speech therapy and occupational therapy were excluded from Coverage under the Program because these therapies as applied to Jacob Micheletti would promote development of this autistic child beyond any level of function he had previously demonstrated.

     The medical necessity of these therapies was not contested and apparently never in doubt.  See  In re Jacob Micheletti (Jacob Micheletti v. State Health Benefits Commission), New Jersey Superior Court, Appellate Divison, Docket No. A-4418-05T2, Opinion Filed January 17, 2007.  However, the State contested Coverage.

     The New Jersey Superior Court, Appellate Division, reversed.  The Appellate Division's opinion includes some references to statutory interpretation, the Program in question being a creature of statute.  For example, the New Jersey Legislature made it clear that it intended to treat statutory regulations of benefits for private Health Insurance Companies in the same way as Coverage would be treated for benefits claimed by State Employees under the Program.  The New Jersey Department of Banking and Insurance adopted a regulation which forbade enforcement of "the nonrestorative exclusion" by private Health Insurance Companies to deny treatment to autistic children, in pertinent part.  Clearly, then, reversal would be warranted by equal treatment of dependents of State Employees enrolled in the State Health Benefits Program, and dependents of Policyholders under Insurance Policies issued by private Health Insurance Companies; extending benefits to dependent autistic children in the latter case should mean that benefits must be extended to a dependent autistic child like Jacob who is the dependent of a State Employee enrolled in the Program.

     However, the Appellate Division did not rest its decision exclusively on the ground of equality.  The New Jersey appellate court reached out to "the reasonable expectation of [the Program's] participants."  Like the reasonable expectations of Policyholders under privately issued Insurance Policies, insured public employees of the State of New Jersey would expect that speech therapy and occupational therapy would be covered, and not excluded, for dependent autistic children.   The  New Jersey Program "deals with the same kinds of consumers of insurance protection, who accept what is available and try to find its meaning."

     Stating that "we find the exclusionary language to be ambiguous," the Appellate Division held that "the exclusions relied upon by the SHBC to deny coverage for the treatment sought for autism are void.  We direct that speech and occupational therapy be instituted for Jake without delay, and that the date of coverage is retroactive to the date of the initial petition."

     But there was a delay.  There was NOT a delay because the State appealed the decision of the Appellate Division, for the State did NOT appeal that decision.  Rather, the State simply did not pay for therapy for Jacob Micheletti, at least until the matter reached the Supreme Court of New Jersey.  The story is reported by Larry Abramson, "Children's Health/Family Wins Suit For Autistic Son's Health Care" (broadcast on National Public Radio on Wednesday, September 26, 2007 and found online at npr.org).  The report includes information on other therapies potentially available to autistic children, and on laws passed or pending in other States that may require Insurance Companies to provide Insurance Coverage for autism therapy, such as in Pennsylvania, South Carolina, and Texas.

     The decision of the New Jersey Supreme Court in the Micheletti case cannot be found online at any site available to the public such as the Court's web site nor in the Rutgers University archives, at least by the undersigned person writing this post.  The only report found of that September 12, 2007 decision may require a subscription:  In re Micheletti (Jacob Micheletti v. State Health Benefits Commission), ___ A.2d ___, 2007 WL 2660279 (New Jersey, No Case Number Located, Opinion Filed September 12, 2007).  In it, the New Jersey Supreme Court granted the Michelettis' petition for certification and Ordered that the State Health Benefits Commission "shall process and pay" all previously submitted invoices for the therapies in question within 14 days of the Court's Order and that the SHBC shall also "process and pay" all invoices submitted on and after September 12, 2007 -- the date of the Order -- no later than 30 days after their submission.  Sanctions were denied, but without prejudice should the SHBC "fail to comply with the terms of this Order."

     At the time that this post is written, it is unknown whether the State of New Jersey has begun to pay any invoices for the treatment of Jacob Micheletti.

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Terrorism Risk Insurance Expanded, Hurricane Risk Insurance Almost Nonexistent.

     The United States House of Representatives recently voted to expand the available Coverage of "Terrorism Insurance" and also to extend the Terrorism Risk Insurance Act for 15 years.  The Act, or "TRIA", was first enacted in 2002.  The extension vote was 312 to 110.  It is reported that commercial developers and Commercial Insurance Companies asked for the Federal Treasury to backstop such Coverage because terrorism insurance is scarce.  It is also risky.  See Stephen Labaton, "House Approves Plan to Aid Insurers"/"Terrorism Coverage, Now Scarce, Would be Underwritten by U.S." (New York Times Nat'l Ed., Business Section, p. C3, Col. 1 Thursday, Sept. 20, 2007).

     The extension of TRIA will be an occasion for many comments, no doubt.  One editorial board, however, adds a comparison to experiences even more recent than 091101.   In basic and simple terms, Hurricane Insurance Coverage is similarly scarce.  Property owners including Commercial Insurance Policyholders facing the risk of damage from Hurricanes either cannot find or cannot afford Hurricane Risk Insurance.  Economic realities dictate many business changes yet to come, including the absence of Commercial development in Hurricane Risk areas such as in Florida and other Coastal States.  The damages caused by Hurricanes are catastrophic and beyond argument.  "It is safe to say that as Americans we're all in it together.  So if Congress decides it is responsible for one kind of catastrophic risk, it should consider the others as well."   Editorial, "House Turns Its Back On Hurricane Risk," St. Petersburg Times, Saturday, September 22, 2007 (published Online at http://www.sptimes.com).

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Nuclear Exclusion, Part 1: The U.S. House Passes Terrorism Risk Insurance Extension.

     There is a standard Exclusion in Casualty and other Insurance Policies for damage due to nuclear attack.  In what appears to be a little-noticed provision, the U.S. House of Representatives voted 312 to 110 to eliminate that Exclusion.  Ordinarily, the Government of the United States leaves the subject of Insurance to the States.  The  vote of the U.S. House  was on a bill to extend the Terrorism Risk Insurance Act, first passed in 2002, for another 15 years.  The extension bill included the provision deleting an Exclusion for damages due to nuclear, biological, chemical or radiological attack and instead requiring Commercial Property and Casualty Insurance Companies to cover losses resulting from such attacks, it is reported in Stephen Labaton, "House Approves Plan to Aid Insurers/Terrorism Coverage, Now Scarce, Would be Underwritten by U.S." (New York Times Nat'l Ed., Business Section, p. C3, Col. 1 Thursday, September 20, 2007).

     Whether the United States Senate will approve the bill with the Nuclear Exclusion elimination provision, or take some other action if any, remains to be seen.  It also remains to be seen what the next Federal foray into the area of Insurance will bring.

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Expert Witnesses: Guidance, Documents, and Court Orders.

    Experts in Insurance Cases can find guidance in cases involving Experts in other kinds of cases, of course.  For example, there is currently a flap involving use by a Plaintiff's Expert Witness physician, of documents protected by Court Order.  The Defendant in that case disputed the Expert's use of the protected documents.  Regardless of the other ramifications of the flap, including whether the Expert admitted to "illegal" acts or not, all involved agree that the Expert in question will pay $100,000.00 to the Defendant.  The Defendant announced that it will give the money to charity.

    The convoluted and complicated story, such as it has become known at this time, including  an explanation of many lengthy Orders entered in the case by Federal Judge Jack B. Weinstein of the United States District Court for the Southern District of New York, is being widely reported thanks to the results of a lot of hard work posted in several informative places, including Torts Prof Blog and Health Blog of the Wall Street Journal Online.

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Unexpected Jobs Decline Hits Title Insurers: What Effect on Coverage?

    Before Friday, September 7, 2007 many economists expected the United States economy to add 100,000 jobs in the preceding month.  Instead, the U.S. economy lost 4,000 jobs in August, 2007.

     It is reported that service industries, a category which includes most Insurance Companies, ran counter to the payroll reductions event and added 60,000 jobs in August, 2007 after adding 78,000 workers to the payrolls in July, 2007.

    Two Title Insurance Companies, however, are reported to have indeed lost workers and reduced their payrolls.  They are apparently displaying the continuing effects of an economy in which fewer people are purchasing either homes or title insurance:  First American Corporation, said to be the largest Title Insurance Company  in the United States, and LandAmerica Financial Group Inc.  First American reportedly has reduced or will reduce its payroll by no longer employing 1,300 people; the number of workers sent home by LandAmerica is reportedly 1,100.  See Bob Willis, "U.S. Economy:  Employment Unexpectedly Drops in August (Update 7)" (Bloomberg.com, Friday, September 7, 2007).

     Time will tell what effects, if any, fewer people working at Title Insurance Companies will have on Insurance Coverage Claims on Title Insurance Policies particularly if, in the future, the U.S. economy makes Claims more attractive.

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No Bar to Settlement of NAIC Members Imposing Fines.

    Under the auspices of the National Association of Insurance Commissioners, or "NAIC," 36 States and the District of Columbia (or 37 States, depending on which source is accessed), a settlement of fines and penalties has been reached with United Healthcare, a unit of UnitedHealth Group.   The payout is apparently in stages:  A guaranteed floor of $12,000,000.00 capped at an additional $20,000,000.00 depending on whether UHC performs its obligations under the settlement agreement which includes submission to several monitoring programs.  The total possible payout is just shy of the number of people who receive medical benefits from UHC, which amounts to nearly 29,000,000 persons.

    The five insurance departments that headed the settlement negotiations are responsible now for monitoring compliance with a "process improvement plan" by United Healthcare.    The five lead insurance departments are Arkansas, Connecticut, Florida, Iowa and New York.  Iowa will serve as the clerk responsible for filing all documents and Iowa will also be responsible for taking the lead on compliance with examination and statutory requirements.  The health insurer is reported to have 42,492 Policyholders in Iowa.  See September 6, 2007 Iowa Insurance Division Press Release.

    The New York Insurance Department reports that the conduct that led to this process improvement settlement plan included the following:

The investigation found many errors in claim processing, such as not applying correct fee schedules and not applying deductibles correctly.  Also, the company frequently violated prompt payment rules.  And because of poor controls and oversight, the company was generally unable to correct problems when they were brought to its attention by state regulators.

The largest single payment under the settlement is due to be paid to New York:  $4,000,000.00 in settled fines on a Policyholder base of approximately 1,000,000 New Yorkers.  See September 6, 2007 Press Release, New York State Department of Insurance.

    No press releases nor news reports have yet been found in which this reported agreement was said to be challenged on the basis of preemption or any other bar to this settlement of fines and penalties which were sought by the States (or possibly sought by many States and by the District of Columbia).

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Ms. LaCoste's Louisiana Hospital Admission on August 28, 2005.

    August 28, 2005 was the day before Hurricane Katrina struck.   Ms. Althea LaCoste was admitted to the hospital in New Orleans that day.  The next day,  Katrina struck, the lights went out, and all electrical power including the emergency power went off of the machines that sustained Ms. LaCoste's life.  She passed away, still in the hospital.  The legal representative of her Estate (among other persons) sued the hospital for the loss of emergency electrical power and for not having an evacuation plan.

     The Defendant contended that it was really being accused of medical malpractice.  The Hospital alleged that the Plaintiffs sued it over decisions which affected patient care.  Thus, the Defendant Hospital argued, the claims against it should be routed through state review panels before any Trials are set, if Trials take place at all depending on the results of the review process.

    On Wednesday, September 5, 2007, the Louisiana Supreme Court held that these claims will not be required to languish in the system of state medical malpractice review, nor will they be subjected to the Louisiana $500,000.00 limit on medical malpractice awards, in  Stephen B. LaCoste v. Pendleton Methodist Hospital, L.L.C. (La. Case Nos. 2007.CC.0008, 2007.0016, Opinion Filed September 5, 2007).  The decision that the claims described above are not "medical malpractice claims" was by a vote of 4 to 3.  It is the law of Louisiana.  (As a Judge of the so-called lower courts in Florida once said to another Florida lawyer, "I am duty-bound to follow the decision of the Supreme Court whether it is decided by a vote of 4 to 3, or 7 to 0.")

    So many Hurricane Katrina Insurance Coverage Cases are decided in the  Federal Courts.  In the LaCoste case, a State Supreme Court has had its say.

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Insurance Coverage and "The Causation Regime":....

                   ....  Wind and Water Nationwide, and in the Fifth Circuit.

    A panel of the Federal Fifth Circuit Court of Appeals has written an unusual opinion in an effort to reinstate the validity of Nationwide Mutual Insurance Company's "anti-concurrent clause" Exclusion in Mississippi:  Download Leonard_v. Nationwide Mutual Insurance Co. (5th Cir. Case No. 06.61130, Opinion Filed Thursday, Aug. 30, 2007).pdf.  The three Judges on the panel are Texas lawyers.

    Although the panel of Federal Appellate Judges affirmed the Judgment of the Trial Court, their opinion aggressively disputes the validity of the Trial Judge's reasoning and asserts the panel's jurisdiction to do so.  Ultimately, the Appellate reasoning for writing this lengthy opinion is unconvincing on the threshold issue of appellate jurisdiction.

    The panel affirmed the Judgment of the United States District Court for the Southern District of Mississippi.  That Judgment, entered after a bench trial, awarded the Policyholders-Plaintiffs $1,228.16, which was the amount of damages determined on the evidence of record in that case "to have been caused solely by wind."  Id. at 7.  The Federal Appellate Court affirmed, agreeing that on the record evidence that was the correct result.  However, the Appellate opinion stretched out for 36 pages for another reason entirely:  The Federal Appellate Judges wrote to agree with the result and affirm the Judgment but mainly to write about Nationwide's Exclusion in Mississippi--although the Exclusion did not apply to the evidence.  The "anti-concurrent cause" Exclusion is called that for a reason.

    Concurrent causation, in Florida and in Mississippi according to the District Judge's opinion, is a doctrine of proximate cause and tort law rather than Insurance Coverage Law.  Where two or more causes combine 'concurrently', or 'concur', to cause damage which separately they could not have caused, the doctrine of concurrent causation applies, in basic and simple terms. 

    Nationwide inserted a fairly standard Exclusion in its Homeowner's Insurance Policy for the apparent purpose of meeting the doctrine of concurrent causation and so to Exclude the damages resulting from what tort law recognizes as concurrent causes.  Whether Nationwide succeeded, or whether the chosen language has a different Insurance Coverage result such as to attempt to Exclude any Coverage whenever a covered peril combines with an Excluded peril regardless of what the law recognizes as concurrent causation, simply was not addressed in the lengthy Federal Appellate opinion.  Here is the chosen language, as quoted and emphasized on page 4 of the opinion:

1.  We do not cover loss to any property resulting directly or indirectly from any of the following.  Such a loss is excluded even if another peril or event contributed concurrently or in any sequence to cause the loss ....

    In the words of the Federal Appellate Judges, this language is not ambiguous.  Further, in their view, this Exclusion is valid under Mississippi law, distinguishing many Mississippi Supreme Court Insurance Coverage decisions in the process.  Id. at 16-19.  The Mississippi State Courts may have the final word.

    In the interim, there is the new opinion of a Federal Appellate panel in the Leonard case.   It raises several questions, the answers to which involve an understanding of Insurance Coverage Law:

• The opinion clearly contains the words that the Homeowner's Insurance Policy involved in this case was an "all-risk" policy.  However, the next sentence of the appellate opinion describes the Policy as a named perils policy with the assertion that "Nationwide's policy covers only damage caused by certain instrumentalities -- or 'perils' ...."  Id. at 2.  "All Risks" and "Named Perils" Coverages are not the same.  The Burdens of Proof of Coverage are different.
• With specific reference to the "anti-concurrent cause" Exclusion, in the  Federal Appellate Court opinion the word "synergistic" is used at least three times instead of the word "concurrent," to describe the cause of the loss.  The Policy contained the word, "concurrent," and not the word, "synergistic" which, according to a standard dictionary, means instead the action of discrete agents such that the total result is greater than the sum of the individual parts.  This does not appear to have anything to do with Nationwide's Exclusion, quoted above, or with the Leonards' Insurance Coverage Claim.
• Further, the opinion is confusing on the Leonards' Burden of Proof, containing the admonition that even though there was no evidence of concurrent causation, if there had been such evidence which, again, there was not, then "had they [the Policyholders] also proved that a portion of their property damage was caused by the concurrent or sequential action of water -- or any number of other enumerated water-borne perils -- the policy clearly disallows recovery."  Id. at 14-15.  [Emphasis added.]  The problem with that statement is that Policyholders in Mississippi, as in most United States jurisdictions, never need to "also prove" an Exclusion, only  Nationwide had the burden to prove its Exclusion.  Clearly it failed to prove it in the Leonard case.

Answers to these and other questions of Insurance Coverage Law may await the outcome of other Coverage Cases in Mississippi, and elsewhere.

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Privilege, Production, Log and Order.

     Policyholders and their Counsel will ordinarily request production of the Insurance Company's Claims File in an Insurance Coverage dispute.  Sometimes they will even seek "production of all documents added to [the Insurance Company's] claim file after [the Policyholder] brought suit."  This request for production was served very recently in  Merrick v. Paul Revere Life Ins. Co. (9th Cir. Case Nos. 05.16380, 05.17059, Opinion Filed August 31, 2007).

    The Insurance Companies' Counsel filed a response with objections to this request for production.  Their response included an assertion that the attorney-client privilege barred production of the requested documents.  The Policyholder filed a motion to compel and "the magistrate judge warned the insurers that failure to produce a privilege log would waive privilege and instructed the insurers not to invoke the privilege unless the claim file actually included privileged material."  Id. at 11116.

    The Insurance Companies then filed a supplement response to the Policyholder's request for production, in which they again raised the attorney-client privilege  --  without a privilege log.  Further, they "attested" that they had already produced all responsive documents anyway.  Id.

    The Policyholders asked for and received another Hearing before the Magistrate Judge.  The Magistrate Judge granted the Policyholder's Motion to Compel and "held all privileges waived and ordered the insurers to produce all responsive documents."  Id. at 11117.  "The insurers produced no additional documents in response; indeed, Unum Provident reiterated its privilege claim in a later discovery response."  Id.  [Emphasis added.]

    As Trial approached, the Policyholder filed a motion in limine "to suppress all documents in his claim file acquired after litigation commenced, on the ground that the insurers were picking and choosing which documents would be produced in discovery."  In their response to the Policyholder's Motion in Limine, "the insurers stated that no documents had been withheld on the basis of privilege," although the Federal Appellate Court found in the record "that the insurers had collected over 3,000 pages of documents following the filing of the suit yet produced only three short memos analyzing that material."  Id.

    The Federal District Judge granted the Policyholder's Motion in Limine.  "After the court granted the motion in limine, the insurers submitted a declaration that they did not withhold any documents on the basis of privilege."  At Trial, the District Judge "suppressed much of this documentation on the ground that defendants [the Insurance Companies in this case] were picking and choosing which documents to produce."  Id.

    On appeal, the Federal Ninth Circuit Court of Appeals affirmed the District Judge's Order granting the Policyholder's Motion in Limine on this record.  Id. at 11123.

    As a Wise Person once said, "Those who have ears to hear, let them hear."

    The Merrick v. Paul Revere Life Insurance Co. (9th Cir. Opinion Filed August 31, 2007) was posted on Insurance Claims and Bad Faith, regarding other rulings by the Ninth Circuit including on Bad Faith awards and Punitive Damages assessments, the day after the case was decided by the Ninth Circuit.  Here is a link: Insurance Claims and Bad Faith.
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