Atlanta Injury Law Blog

As an attorney in Atlanta handling catastrophic injury cases, I often see problems with the "sticker price" on medical and hospital bills significantly exceeding the "reasonable and customary" amounts paid by medical insurers, and occasionally huge gaps between the bills and the available coverage. There are no easy solutions, so we just work it out on a case by case basis for our clients. The following video report from the Wall Street Journal is enlightening.

State Senator Cecil Staton (R-Macon) is sponsoring Senate Bill 276 which would allow Georgia drivers to add 100 percent of an under/uninsured motorist (UM) insurance policy on top of the at-fault driver’s liability policy. UM insurance is additional coverage that protects individuals who are hit by drivers with a low level of insurance, or none at all.“For surviving victims of drunk driving crashes, medical bills are their greatest hurdle,” said Denise Thames, executive director of MADD Georgia. “Having the ability to get full benefit of their UM policy and the at-fault drivers policy would be a tremendous gain. This is one way we can insure that all victim survivors are receiving the full benefit of what they have paid for in their premiums.”

Under current state law, an at-fault driver’s liability policy counts against – or eats into – the accident victim’s UM coverage. For example, a victim who paid for $50,000 in UM coverage would only receive half of that amount ($25,000) if they were hit by a driver carrying the minimum $25,000 in liability insurance. If the accident victim’s car repair and medical bills totaled more than $50,000, they would be responsible for payment out of their own pocket.

Thus, drivers who have faithfully paid extra premiums for UM coverage are often not able to access all of it when they need it most. Even worse, the insurance companies get to pocket whatever amount they are not required by law to pay out.

In fact, Georgia drivers only receive the full benefit of UM coverage if hit by an uninsured motorist. “Just because you paid for the extra coverage doesn’t guarantee you’ll get to use 100 percent of the policy when you need it,” said Allison Wall, executive director of Georgia Watch. “This is the reality for Georgia drivers today, and most don’t realize it.”

Nearly two dozen other states – including Alabama and South Carolina – allow UM stacking when the at-fault driver has minimum coverage. State Farm Insurance Company, the state’s largest car insurance carrier, estimates that the cost of UM policies in Georgia would increase on average between $2.50 and $4 a month if stacking were allowed.

According to State Farm’s data, Alabama drivers pay an average $28.75 premium for a six-month policy of $25,000 of UM coverage that will stack on top of an at-fault driver’s liability coverage. For the same UM coverage that doesn’t stack, Georgia drivers currently pay an average $13 premium.

See news report by Andy Peters in the Fulton County Daily Report.

Several weeks ago, the story broke that Progressive Insurance sent private investigators to join its own policyholders' church and joined their home Bible study group under false presenses, hoping to uncover evidence inconsistent with the insureds' injury claim. When the company was caught in that ruse, the CEO said what they had done "appalling."  Now in responding to a lawsuit, Progressive says this conduct was "reasonable."   How does "appalling" so quickly become "reasonable." Could it be that is was "appalling" only that they got caught?

It takes a lot for Georgia Insurance Commissioner John Oxendine -- who is normally considered to be in the pocket of the insurance industry -- to launch an apparently aggressive investigation of a major insurance company.  Now, however, even Oxendine has ordered a market conduct examination into recent allegations of invasion of privacy, fraud and other misdeeds by Progressive Insurance Co. for allegedly sending private investigators into a church confessional to spy on a couple who had filed suit against the company. Two private detectives for Progressive allegedly posed as a married couple wanting to join the church. They talked their way into a private confessional at a member's home and recorded potentially embarrassing details from several people there. Progressive says it's sorry.  More likely the company is sorry it got caught.

Thanks to alert reader Shannon Duffy at American Lawyer Media for calling to my attention a recent federal district court ruling in Philadelphia.

In Mills v. London Grove Township, a toddler had a serious serious head injury resulting in cerebral palsy.  Liability carriers agreed to pay their grossly inadequate policy limits. After fees and expenses a total of $357,170.21 was available for a special needs trust for the child. However, the insurance company that paid medical benefits under the father's employer's ERISA plan demanded that it be reimbursed $123,690.12 from the child's recovery.  The court analyzed the ERISA claim under Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) and Sereboff v. Mid Atlantic Medical Serv., Inc., 547 U.S. (2006). The court concluded, in part, as follows:

The net effect of the two cited Supreme Court opinions,as applied to the present case, is, in my view, as follows: the parties to this litigation have a right to settle their differences, and have done so. The only question before this court is whether the proposed settlement is fair to the minor. I conclude that it is. Nothing in the ERISA plan confers upon ACS Recovery Services a right to control the conduct of this litigation; it has no right to object to the proposed settlement.

. . .

In the unusual circumstances of this case, I conclude that it is appropriate to require the dotting of all i’s and the crossing of all t’s. ACS Recovery Services paid the medical benefits without first obtaining a written reimbursement agreement, as contemplated by the Plan. Assuming that its right to assert a lien was not fatally impaired by that omission, its lien would not come into existence until the Plan beneficiary (the plaintiff-husband-employee) received funds reimbursing the medical expenses in question. That has not yet occurred, and, if the proposed compromise settlement is effectuated in all its
terms, will not occur.

ACS Recovery Services’ belated request for injunctive relief seeks to enjoin the transfer of funds to the “special needs trust.” Since the adult plaintiffs will not receive any of the funds in question, they are not proposing to transfer any
funds to the special needs trust. ACS Recovery Services has not sought injunctive relief from anyone else.

Ordinarily, a court would be reluctant to rely upon the technicalities discussed above. In this case, however, the equities seem to favor such an approach. The damages suffered by the minor-plaintiff are astronomical, and life-long. In the final analysis, the real dispute generated by ACS’s opposition is between ACS and the taxpayers who, in the future, will be called upon to bear the minor’s medical expenses. ACS was paid premiums for its coverage; the taxpayers have not been.

This opinion was written by Senior Judge John Fullam, age 85, who was appointed by President Johnson in 1966.  It is good to have some wise older judges who remain productive and are able to see past the corporate heartlessness that seems to predominate in some quarters these days.

This month's Trial magazine includes a grimly fascinating article by Santa Fe lawyer David Berardinelli about the meteoric increase in profits at Allstate at the expense of policyholders and claimants. In 1995, Allstate installed a new claims-handling system called “Claims Core Process Redesign” (CCPR) designed by McKinsey & Co., the corporate consulting firm whose strategic thinking that made Enron a Wall Street darling and disaster.

McKinsey encouraged Allstate to secretly adopt a business strategy promoting the interests of its shareholders at the direct expense of its policyholders. McKinsey told Allstate: “The senior management team views the [profit] improvement program as a top priority, with unanimity in their belief that change needs to occur. . . . They are willing to make fundamental changes in people, procedures, management systems, structure, etc., to ‘do whatever it takes’ [to increase profits and shareholder value].”  McKinsey repeatedly refers to the need to “modify bad-faith laws” and “modify the rules and regulations [governing insurance]” for CCPR to be effective.

McKinsey’s introduction of its business paradigm into the casualty insurance industry was fundamentally wrong. This wrong was probably best expressed almost 30 years ago by the California Supreme Court in one of the nation’s landmark insurance cases:

The insurer’s obligations are . . . rooted in their status as purveyors of a vital service labeled quasi-public in nature. Suppliers of services affected with a public interest must take the public’s interest seriously, where necessary placing it before their interest in maximizing gains and limiting disbursements. . . . [A]s a supplier of a public service rather than a manufactured product, the obligations of insurers go beyond meeting reasonable expectations of coverage. The obligations of good faith and fair dealing encompass qualities of decency and humanity inherent in the responsibilities of a fiduciary. Insurers hold themselves out as fiduciaries, and with the public’s trust must go private responsibility consonant with that trust.

In 1994, the year before CCPR was implemented, Allstate was paying out about 69 cents on claims for every premium dollar collected. By 1998, claim payments for private passenger auto claims plunged to about 51.7 cents out of every premium dollar, and by  2006 overall claim payments plunged to just 43.5 cents of every premium dollar collected.

 Allstate's profits exploded.  For the previous decade the average annual pretax operating income was $820 million.  In the decade after implementing CCCR, the average annual operating profit was $2.5 billion per year, a 3,335 percent increase.  The CEO who adopted the new claims system retired after four years after amaxxing a personal fortune of $53 million, while the current CEO has accumulated $150 million, primarily on the basis of denying and delaying claims and grinding policyholders and claimants into the ground.

The McKinsey strategy for Allstate to increase profits by grinding policyholders and claimants into the dirt is illustrated in a vast array of Power Point slides, which have not been released free of a protective order.  One key slide contrast the "good hands" in the Allstate ads with boxing gloves indicative of a more combative resistance to paying even the most legitimate of claims.

In Berardinelli's words:

The “Good Hands or Boxing Gloves” slide shows how McKinsey intended to win the claims economic game in two phases that deliberately and illegally exploited the economic pressures placed on a policyholder suffering from financial loss. The first phase (Good Hands) required Allstate to change how it evaluated and negotiated claims; the second phase (Boxing Gloves) required it to change how it litigated claims.

The first phase involved arbitrarily lowering Allstate’s claims evaluations by using a computer program called Colossus, which was calibrated to produce evaluations at least 20 percent lower on average than Allstate’s pre-CCPR claim evaluations. Allstate would require its adjusters to make nonnegotiable, take-it-or-leave-it settlement offers based on these artificially low settlement evaluations.

McKinsey estimated that, when confronted with the threat of a substantial delay in getting any benefits at all, 90 percent of policyholders would succumb within six months to the economic pressures caused by their loss and give up without a fight, accepting the low offers. These policyholders would get “prompt” payment—the Good Hands treatment.

The second, Boxing Gloves, phase involved a plan to deliberately abuse the civil justice system as a weapon of attrition against the estimated 10 percent of policyholders who would refuse to accept Allstate’s reduced benefits. These policyholders would be driven into the “kill box” of McKinsey’s zero-sum economic game—the American civil justice system.

The Boxing Gloves strategy aimed to make litigating claims against Allstate so time-consuming and expensive that any victory by the policyholder would be purely Pyrrhic. McKinsey believed that most policyholders and their attorneys would refuse to endure the expense and delay of litigation if they knew that Allstate had made an institutional decision to try every disputed claim to verdict—no matter the amount in controversy and regardless of the cost to Allstate of doing so.

I believe all of this is true.  However, in one case last year with Allstate on the other side, by the time we got ready trial I had them so much over the barrel regarding potential bad faith that they paid $300,000 on a $100,000 liability auto policy in a case with preexisting degenerative neck conditions and  virtually no visible property damage to my client's car.

One of the perennial annoyances in personal injury law practice is the need to deal with the Medicare bureaucracy regarding the claims for reimbursement out of personal injury recoveries of a portion of funds paid by Medicare for medical expense.  It's bad enough to have to send them money, but it's worse to have to deal with the delay and mindlessness of the bureaucracy. Today I was alerted to a change in the way Medicare deals with those reimbursement claim.

The change in Medicare reimbursement protocol outlined below is only one of many examples of how public and private health care agencies (agencies) are outsourcing their efforts to expose the beneficiaries and attorneys involved in any settlement where the agencies have made conditional payments for injury-related care. These agencies continue to pour substantial resources into the recovery efforts associated with liability and workers compensation settlements.

The Centers for Medicare & Medicaid Services (CMS) awarded a single contract for a national Medicare Secondary Payer Recovery Contractor (MSPRC) to the Chickasaw Nation Industries, Inc.– Administrative Services, LLC (CNI). 

Effective October 2, 2006, CMS transitioned all Medicare Secondary Payer (MSP) recovery workloads, both Group Health Plan (GHP) and non-GHP, to a national MSPRC (and away from the dozen or so contractors that were handling the MSP recovery effort regionally).  The new, national MSPRC will focus its initial efforts on Workers Compensation, No-Fault and Liability cases, including product liability and medical malpractice cases. The lead (regional) recovery contractor with which you have had contact in the past will no longer be responsible for this activity.     

For all new MSP initial recovery demand letters issued on or after the implementation date for the MSPRC (October 2, 2006), you should respond to the entity which issues the recovery demand letter to you. Except for provider, physician, or other supplier MSP recovery claims and a limited number of GHP debts in certain states, this will routinely be the MSPRC.

General Rules:

• The national MSPRC will have responsibility for all new MSP recovery demand letters issued on or after the implementation date for the MSPRC (October 2, 2006), as well as all subsequent CMS actions on those recovery claims. The two exceptions to this are recovery demand letters issued by the MSP Recovery Audit Contractors (RACs) implemented as a demonstration under the Medicare Modernization Act of 2003 and MSP recovery demand letters issued by the claims processing contractors to providers, physician, and other suppliers. The RACs will continue to have responsibility for certain MSP GHP based recovery demands for the States of California, Florida, and New York. The three MSP RACs are: Diversified Collection Systems (California), Public Consulting Group (Florida), and Public Consulting Group (New York).
  
  NOTE: The responsibility for all pending MSP recovery cases where a recovery demand letter has not yet been issued will, aside from the two exceptions noted in the preceding paragraph, be the responsibility of the MSPRC. (Please note that a letter providing the amount of Medicare’s conditional payments in connection with a workers’ compensation or liability or no-fault insurance case is not a recovery demand letter.) This responsibility is in line with the MSPRC’s responsibility for the issuance of all new MSP recovery demand letters issued on or after October 2, 2006 (again, with the two exceptions noted in the preceding paragraph).

• Due to systems issues, the Medicare contractors listed immediately below will continue to have responsibility for all further CMS collection actions with respect to MSP recovery claims where the initial recovery demand letter was issued prior to the implementation date of the MSPRC (October 2, 2006). This includes responsibility for the "Notice of Intent to Refer Debt to the Department of Treasury" where a recovery claim is not repaid timely. The RACs will also continue to have this responsibility for all RAC-initiated MSP recovery claims.
  • Empire – Syracuse NY or Harrisburg PA
  • First Coast Service Options – Jacksonville FL
  • Mutual of Omaha – Omaha NE
  • Palmetto – Augusta GA or Columbia SC or Columbus OH
  • Trailblazer – Denison TX

The MSPRC will have responsibility for all further CMS collection actions for MSP recovery demand letters issued before the implementation date for the MSPRC (October 2, 2006) unless the recovery demand letter was: (1) issued by one of the Medicare contractors listed immediately above; (2) issued by one of the RACs; or (3) issued to a provider, physician, or other supplier.

Once a recovery claim is referred to the Department of the Treasury, the contractor which issued the recovery demand letter and the notice of intent to refer the debt to Treasury will take no further collection action. You should direct any further correspondence to the Department of the Treasury (or its contractor if you have received correspondence from an entity under contract to the Department of the Treasury).

Contact Information for the MSPRC:

MSPRC telephone access became available on October 2, 2006. The number for the MSPRC’s dedicated call center is 1-866-MSP-RC20 (1-866-677-7220), available from 8AM to 8PM Eastern time, Monday through Friday, with the exception of holidays.

The MSPRC is a recovery contractor.   See http://www.cms.hhs.gov/COBGeneralInformation/ for further information about the COBC, including contact information, attorney information, etc. The COBC’s toll- free line is 1-800-999-1118 (TTY/TDD 1-800-318-8782 for the hearing and speech impaired).

The first priority of the MSPRC will be to address previously submitted notices of settlement and to make a formal Medicare demand.  The CMS understands the need to identify Medicare’s final claim and to disburse settlement proceeds.  

The new national recovery contractor will be: MSPRC Liability, P.O. Box 33828, Detroit, MI  48232-3828,Telephone: 1-866-MSP-RC20 (1-866-677-7220).

In a landmark decision released August 31, 2006, the Georgia Court of Appeals has resolved in one case two crucial issues on Uninsured Motorist (UM) insurance coverage:

• A liability umbrella policy that includes automobile liability must include UM coverage equal to the liability limits unless the UM coverage is affirmatively rejected in writing, notwithstanding an exclusion of UM coverage in the policy. 
  
• Renewals of auto liability policies that existed before 7/1/01 that did not include UM coverage must include UM coverage equal to the liability coverage unless UM coverage is affirmatively rejected in writing. The statute requiring UM equal to liability coverage exempted renewals of policies existing before 7/1/01.  The plain language of OCGA § 33-7-11(a)(3) simply “provides that an insurer is not required to increase UM coverage in renewal policies for coverage existing prior to July 1, 2001.”  However, while the amount of UM coverage need not be increased on renewal policies, if there was no UM coverage the exemption does not apply. 
  

Last month there was a news story about the New Jersey Committee on Attorney Advertising, a panel appointed by the Supreme Court of New Jersey ruling that attorney advertisements that tout listings such as the "Super Lawyers" listings violate professional responsibility rules against ads that compare lawyers’ services or create an "unjustified expectation about results."  That gave me pause, as it did the marketing folks at every big law firm in Atlanta, since the profile on my web site includes listings in the "Super Lawyers" issue of Atlanta Magazine, "Legal Elite" issue of Georgia Trend magazine, and the Bar Register of Preeminent Lawyers.

However, the Fulton County Daily Report published an article on August 11th reporting an analysis to the effect that,  while Georgia’s ethics rules contain proscriptions against comparative advertisements and ads that create unwarranted expectations, the language in Georgia is more permissive than that found in New Jersey’s ethics rules. The New Jersey rule prohibits as false and misleading any advertisement that "compares the lawyer’s services with other lawyers’ services." Under Rule 7.1(a)(3) of the Georgia Rules of Professional Conduct, the rule against comparisons does not apply if the comparison "can be factually substantiated."

The "Super Lawyers," "Legal Elite," and "Preeminent Lawyers" lists are all based upon periodic surveys of our peers in the legal profession, and cannot be purchased.  While the methodology is certainly not perfect, neither is it meaningless or factually unsubstantiated.  Therefore, we will continue to include those designations on the web site.

Last month the U.S. Supreme Court issued a unanimous decision that initially appeared to be catastrophic for injury victims whose employee health benefit plans had paid medical expenses.  In Sereboff v. Mid Atlantic Medical Services, Inc., 126 S.Ct. 1869 (U.S.,2006), Chief Justice Roberts wrote for  the court that an ERISA benefit plan could sue in federal court for reimbursement of medical benefit it had paid after the injury victim recovers from the party responsible for the injury.  Those of us who deal with these cases every day recognize how devastating the net effect of that can be, taking away much if not all of the victim's recovery after payment of the fees and expenses involved in holding the opposite party accountable.

However, upon further examination, there are still viable defenses against most if not all such reimbursement claims. For example, if the benefit plan is insured, the insurance company's portion of the claim for reimbursement is still subject to state laws regulating insurance, which in Georgia includes a statutory "full compensation" rule. As the benefit plan's claim arises in equity, a full range of equitable defenses may be asserted.  While it may be necessary to negotiate compromises on more ERISA reimbursement claims than in recent years, it will still serve the injury victim's interests for their lawyers to stake out a well-informed hard line defense against such claims.  Following is a sample of a letter to the subrogation agent of an insured ERISA plan that may be adapted in individual circumstances.

This firm represents > in the above-referenced matter with regard to serious bodily injuries sustained in a motor vehicle collision on >. You have asserted on behalf of > a claim for subrogation or reimbursement of medical benefits paid to the medical providers treating > as a result of this injury.

As you know, the Employee Retirement Income Security Act of 1974 (ERISA) preempts all state laws “insofar as they . . . relate to any employee benefit plan,”29 U.S.C. § 1144(a), but saves from preemption state “law[s] ... which regulat[e] insurance ...·,”§ 1144(b)(2)(A).  The United States Supreme Court held, in the case of FMC Corp. v. Holliday, 498 U.S. 52 (1990), that employee benefit plans that are insured are subject to indirect state regulation, as an insurance company that insures a plan remains an insurer for purposes of state laws “purporting to regulate insurance” after application of the preemption clause, savings clause and deemer clause of the ERISA statute.

Therefore, an ERISA plan is bound by state insurance laws insofar as they apply to the plan’s insurer.  To save state law from preemption, ERISA's savings clause does not require that state law regulate "insurance companies" or even "the business of insurance"; it need only be a "law ... which regulates insurance." Employee Retirement Income Security Act of 1974, § 514(b)(2)(A), 29 U.S.C.A. § 1144(b)(2)(A).

You are undoubtedly familiar with the recent case of Sereboff v. Mid Atlantic Medical Services, Inc., 126 S.Ct. 1869 (U.S.,2006).  In Sereboff, the Solicitor General of the United States filed an amicus curie brief on the side of the ERISA plan, citing FMC v. Holliday and stating: “State laws limiting reimbursement may of course apply to insured ERISA plans if those state laws are directed to insurance.”

While the “deemer” clause of the ERISA statute may override the “savings” clause in the case of a self-funded plan, it appears that yours is an insured rather than a self-funded plan, so the Georgia insurance law is not preempted.  If you disagree, please send me a complete copy of the plan in the form in which it existed on the date of the incident referenced above, within ten days, including all documentation of the allocation of losses between insurance and self-insured reserve. 

Because this is an insured rather than self-funded ERISA plan, the “savings” clause of the ERISA statute, as discussed above, prevents preemption of Georgia state laws governing insurance. By both statute and case law, Georgia law regulating the business of insurance includes a “full compensation” rule that severely limits medical insurance reimbursement claims and bars medical subrogation in personal injury cases. See O.C.G.A. § 33-24-56.1 and Duncan v. Integon General Insurance Corp., 267 Ga. 646, 482 S.E.2d 325 (1997). The Georgia “full compensation” rule  does not provide for an insurer to exclude operation of the “full compensation” rule by including in a contract of adhesion “first dollar” language to exclude operation of the doctrine. If it were a self-funded ERISA plan, the Eleventh Circuit case law would permit that, but this is an insured plan subject to Georgia state law that does not allow contractual exclusion of the doctrine. Under the Georgia law, virtually any compromise settlement constitutes less than “full compensation.”

> had a significant preexisting condition related to another collision in >, so there is a substantial question of fact whether the medical expenses you claim for reimbursement are due to the preexisting condition or the new injury. In addition, there are questions of liability that will likely require a compromise for less than full value of the injury.

The ERISA statute authorizes enforcement by “appropriate equitable relief,” and the Sereboff decision makes it clear that any claim for ERISA reimbursement is equitable, and is subject to equitable defenses.  The United States Supreme Court has recognized a number of equitable defenses in other contexts.  These include laches, National R.R. Passenger Corp. v. Morgan, 536 U.S. 101, 121-22, 122 S.Ct. 2061, 2077 (2002); the “clean hands” doctrine, Precision Instrument Mfg. Co. V. Automotive Maintenance Machinery Co., 324 U.S. 806, 814 (1945); and the defense that equity will not aid in enforcement of a forfeiture, Oregon & California R.R. Co. v. U.S., 238 U.S. 393 (1915).  Other equitable defenses include the common fund doctrine, which  would seek setoff for a prorata share of attorneys fees and expenses incurred in obtaining the recovery, and the “made whole” or “full compensation”  doctrine.  As equity follows the law, and Georgia law incorporates the “full compensation” doctrine, that is a extremely significant consideration of equitable defenses in any case in Georgia.

It is potentially significant that any payment to the spouse of the injured person under a claim for loss of consortium is not subject to your claim of lien, and under Georgia law the recovery in a settlement may be allocated to the spouse in a lawful lien avoidance structure.

After review of all available documents and the applicable laws, it appears that > does not have an enforceable claim for reimbursement or subrogation, and that my client would prevail in court if such a claim were asserted. This remains the situation even in light of the recent Supreme Court decision in Sereboff , supra.

Therefore, I am now giving you notice pursuant to O.C.G.A § 33-24-56.1 that in ten (10) days or more we will seek to consummate final resolution of this case by a compromise settlement for less than the full value of the injury, and will then disburse the proceeds, net of fees and expenses, to my client, with no payment of any subrogation or reimbursement claim for medical expenses. If you do not respond within that time with both a complete copy of the plan as it existed on the date of the incident causing injury and with everything required by O.C.G.A. §§ 33-24-56.1, that will constitute your acknowledgment that: the > claim relates to a fully  insured ERISA plan under which state insurance law is not preempted; that you do not have an enforceable claim for reimbursement or subrogation in law or in equity; that it would be inequitable for your claim to result in a forfeiture of my client’s personal injury recovery; that to do so would be contrary to conscience and good faith; that your plan is subject to both the “full compensation” rule under Georgia law and an equitable “made whole” and “common fund” defense; and that you acquiesce in the final consummation of settlement and disbursal of funds without payment of any subrogation or reimbursement claim.

After disbursal of the funds, my representation of my client will continue with regard to any subsequent assertion of a claim by you, so all communication should be directed to me rather than to my client.

Please take due notice of the foregoing and govern yourself accordingly.

                                                                                        Sincerely,

                                                                                        >

Of course, evaluation of ERISA reimbursement claims must be made on a case by case basis after carefully  reviewing plan documents, the allocation of losses between insurance and self-funded reserves, and publicly available information such as the IRS filings of ERISA plans available at freeerisa.com.

Today we received the U.S. 11th Circuit Court of Appeals decision in Giddens v. Equitable Life Assurance Society of the United States, Docket No. 05-10816. See A win for the home team in dentist's disability insurance case and A day at the 11th Circuit. The court affirmed the summary judgment we had won in District Court in favor of Dr. Giddens on his real estate occupation. It was not a surprise or a disappointment that the court reversed the District Court's decision to deny Equitable's motion for summary judgment on the dental occupation, as Dr. Giddens had been away from dental practice due to poor health for four years before submitted his disability claim. See "Occupation defense" in disability insurance.

Interestingly, the Court of Appeals did not even discuss Equitable's arguments for excluding disability opinions of treating physicians under Daubert. See Frivolous Daubert motions continue to seek exclusion of routine testimony by treating physicians.

The Eleventh Circuit decision was designated for publication, so there will be a published appellate precedent that may be of interest to lawyers representing other insureds is disability insurance cases around the country.

The wheels of justice grind far too slowly, but with persistence, oh so fine.

Thanks to Frank Pasternak at Wisconsin Personal Injury Lawyers Blog for the following:

Insurance companies want:
~ Premiums not claims
~ To deter valid lawsuits
~ People to hate lawyers so they never get one
~ You to feel guilt for making legitimate claims
~ You to think you're "not the kind of person who files a lawsuit"
~ Juries to think a person who files a suit is dishonest
~ Jurors minds made up before evidence is heard
~ Your rights minimized or removed
~ Their rights maximized and preserved
~ People to feel juries give away money
~ Verdicts for damages to be less then what is fair
~ Caps on damages to minimize your justice
~ Judges who will avoid holding them accountable

Sometimes it seems like half the job in catastrophic trucking litigation is analysis of insurance coverages. Recently I was consulted by a lawyer in my hometown about a situation in which an owner-operator's insurer had tendered policy limits of $1,000,000. There was also a Lloyd's "contingent liability endorsement" for an additional $1,000,00 issued to a freight broker. While I found no cases directly on point anywhere in the United States, analysis of the coverages was sort of weirdly interesting to someone geeky enough to have lectured seven consecutive years at the Insurance Law Institute. See the analysis below.

TV lawyer shows never portray the tedious work of reviewing documents, researching law, and analyzing the effect of contracts and insurance policies. The recent decision of the Georgia Court of Appeals in Ryder Integrated Logistics, Inc. v. Bellsouth Tecomms. Inc. illustrates the sometimes mind-numbing work involved in figuring out who pays what after a catastrophic incident such as a major truck wreck. This case involves an indemnification agreement between two companies, a primary insurance policy and an excess insurance policy, with everyone trying to pass the buck. See the full text below.

A friend whose two children both have heart defects recently passed along to me waht he has learned about a couple of obscure options for somewhat affordable health care coveage.

First, the Insurance Commissioner's Office has an Assigned Risk program. My friend pays $440 per month for family coverage; the plan pays 70% of charges with a $5000 deductible. It does not cover prescriptions, but drugs are counted under the deductible, and they give a discount for prescriptions. My friend has assigned risk coveage through Blue Cross and can go to any doctor.

Second, there is also a program offered through the state called "Care Entree." Its not health INSURANCE, its Health Discount. Essentially you become the
health insurer, but you only pay that which the insurance company would pay. The Insurance Card you get looks exactly like any other and it uses PCHS (Private Care Health Services) as the plan administrator. Once again, you must agree to have a high deductable, but you only have to pay for those bills that the INSURANCE COMPANY WOULD HAVE TO PAY. That can be a tremendous DISCOUNT. But you must give them enough money to maintain the deductable in THIER ACCOUNT. So that they can pay that amount GUARANTEED. Then you pay that amount.

The plan cost roughly $75 per month, and includes a discount of prescription, Dental, chiropratic etc.

It is well-established Georgia law that insurance contracts are construed to protect the reasonable expectations of the insured. See, e.g., Western Pacific Mut. Ins. Co. v. Davies, 267 Ga.App. 675, 601 S.E.2d 363(2004); Georgia Farm Bureau Mut. Ins. Co. v. Meyers, 249 Ga.App. 322, 324, 548 S.E.2d 67, 69 (2001); Georgia Farm Bureau Mut. Ins. Co. v. Gaster, 248 Ga.App. 198, 201, 546 S.E.2d 30, 31 (2001); Ga. Farm Bureau &c. Ins. Co. v. Huncke, 240 Ga.App. 580, 580-581, 524 S.E.2d 302, 303 (1999); Anderson v. Southern Guar. Ins. Co. of Georgia, 235 Ga.App. 306,309, 508 S.E.2d 726, 730 (1998); American Southern Ins. Co. v. Abbensett, 232 Ga.App. 16, 501 S.E.2d 53 (1998); Home Ins. Co. v. Sunrise Carpet Industries, Inc., 229 Ga.App. 268, 271, 493 S.E.2d 641, 644 (1997); Tifton Machine Works v. Colony Ins. Co., 224 Ga.App. 19, 20, 480 S.E.2d 37 (1996); Cincinnati Ins. Co. v. Davis, 153 Ga.App. 291, 265 S.E.2d 102 (1980); Richards v. Hanover Ins. Co., 250 Ga. 613, 615, 299 S.E.2d 561 (1983).

Where a term of a policy of insurance is susceptible to two or more constructions, even when such multiple constructions are all logical and reasonable, such term is ambiguous and will be strictly construed against the insurer as the drafter and in favor of the insured. O.C.G.A. § 13-2-2(5); Ga. Farm &c. Ins. Co. v. Huncke, supra at 580, 524 S.E.2d 302; Peachtree Cas. Ins. Co. v. Kim, 236 Ga.App. 689, 690, 512 S.E.2d 46 (1999).

Exceptions and exclusions to coverage must be narrowly and strictly construed against the insurer and liberally construed in accordance with the reasonable expectations of the insured to afford coverage. Duncan v. Integon General Ins. Corp., 267 Ga. 646, 482 S.E.2d 325 (1997);Nationwide Mut. Fire Ins. Co. v. Erwin, 240 Ga.App. 816, 817, 525 S.E.2d 393 (1999).

Some disability insurance companies have attempted a perplexing defense with insureds whose declining health has led to a period of unemployment prior to filing a claim for disability benefits. The argument is that the sick insured had not been working, had therefore abandoned his occupation, and having no longer having a gainful occupation from which to become disabled is not entitled to disability benefits. The sophistry of this "Catch-22" occupation defense appears to have been rejected in every reported decision in which it was attempted in the absence of a specific contractual requirement.

"Pure poppycock" is the term a federal district judge used to describe the insurer's assertion of that defense in Norcia v. Equitable Life Assurance Society of U.S., 80 F.Supp.2d 1047 (D.Ariz., 2000). Equitable took the position that its disability insurance policyholder's occupation at the time of the claim, after a long period of declining health, was that of a "retired / unemployed person." Forcefully rejecting that defense, the District Court granted the insured's motion for summary judgment on the contract claim, and in discussing the insured's claim for bad faith characterized Defendant's position as "pure poppycock" that was "utterly bereft either of textual support in the language of the insurance contract or the gloss placed on such language by any Arizona case." That position contrary to the rule of reasonable interpretation of insurance contracts under Georgia law, and is equally bereft of support in any Georgia case. See Giddens v.The Equitable Life Assurance Society of the United States, 356 F.Supp.2d 1313(N.D.Ga.,2004).

In Weaver v. New England Mut. Life Ins. Co., 52 F.Supp.2d 127 (D.Me., 1999), the court rejected the "occupational defense," holding that the insured's suit challenging that position stated a claim for intentional infliction of emotional distress, fraud and punitive damages under Maine law. In Amadeo v. Principal Mut. Life Ins. Co., 290 F.3d 1152 (9th Cir., 2002), the court reversed a summary judgment for the insurer based on the "occupational defense" of an insured who was unemployed when she became disabled. Similarly, in Burriesci v. Paul Revere Life Ins. Co., 679 N.Y.S.2d 778 (1998), the court rejected the "occupational defense" and, relying on rules of insurance policy construction identical to Georgia law, held:

By failing to use language that provides that an insured must be actively working at the time that the disability arises, the policy does not unambiguously exclude coverage for unemployed insureds . . . . We reject defendant's contention that the addition of the term "regularly" to the term "engaged" means only that the policy covers a person who is employed but is not at work when the injury occurs. . . . [D]efendant may not deny benefits to plaintiff because she was temporarily unemployed at the onset of her disability.

See also, Lehman v. Executive Cabinet Salary Continuance Plan, 241 F.Supp.2d 845 (S.D.Ohio, 2003)(Provident wrongly classified occupation where insured retired only because of inability to perform job); Weaver v. New England Mut. Life Ins. Co., 52 F.Supp.2d 127 (D.Me.,1999)(similar position by disability insurer rejected, long discussion of applicability of various causes of action under Maine law).

If an insurer chose to define "occupation" in the policy to require that the insured must be actively working full-time up to the date of disability, it easily could do so. See, e.g., Falik v. Penn Mutual Life Ins. Co., 190 F.Supp.2d 1156, 1160 (E.D.Wis.,2002.); Oglesby v. Penn Mut. Life Ins. Co., 877 F.Supp. 872 (D.Del.,1994). However, in the absence of such a definition in the contract, more reasonable interpretations must apply.

Georgia law does not require total helplessness, or a strict and literal interpretation to total disability income policies, but employs a reasonable interpretation in light of the insured's customary occupation, experience, education, and physical and mental capabilities.

In Parker v. Prudential Insurance Company of America, 224 Ga.App. 865, 482 S.E.2d 483 (1997), the Georgia Court of Appeals reversed summary judgment for a disability insurance carrier. Due to psychiatric illness, an accountant was able to earn only 20% of what he had previously earned in an executive position. Even under a non-occupational disability policy, the Court held:

[D]isability exists if the condition of the insured prevents him from performing a substantial portion of the duties of his occupation or such other line of work as he might reasonably be expected to follow, considering his education, experience, age, and natural ability. . . . [T]otal disability is properly considered within the context of the insured's customary and usual vocation. . . . "[T]otal disability" requires only that the insured be unable to perform substantial portions of his ordinary employment or any other employment approximating the same livelihood as he might fairly be expected to follow, given his personal circumstances, including his experience, education, and physical and mental capabilities.

Likewise, in Equicor, Inc. v. Stamey, 216 Ga.App. 375, 454 S.E.2d 550 (1995), a motorcycle policeman who had degrees in fields in which he had no work experience the court rejected the insurer's denial of disability benefits, reasoning that:

[D]isability exists if the condition of the insured prevents him from performing a substantial portion of the duties of his occupation or such other line of work as he might reasonably be expected to follow, considering his education, experience, age, and natural ability. . . . [T]otal disability is properly considered within the context of the insured's customary and usual vocation." . . . "[T]otal disability" requires only that the insured be unable to perform substantial portions of his ordinary employment or any other employment approximating the same livelihood as he might fairly be expected to follow, given his personal circumstances, including his experience, education, and physical and mental capabilities. (Emphasis supplied)

Even earlier cases sometimes selectively quoted by disability insurance companies support this proposition. In Cato v. Aetna Life Ins. Co., 164 Ga. 392(3), 138 S.E. 787 (1927), the court stated:

When the insured is incapacitated from performing any substantial part of his ordinary duties, a case of total disability is presented, although he is still able to perform some parts of his work. Total disability is inability to do substantially all of the material acts necessary to the transaction of the insured's occupation, in substantially his customary and usual manner. . . . Total disability does not mean absolute physical inability to work at one's occupation, or to pursue any occupation for wages or gain. . . . 138 S.E. at 788.(emp. supplied)

Similarly, in Prudential Ins. Co. of America v. South, 179 Ga. 653, 177 S.E. 499 (1934),the court held:

[T]he policy should be construed liberally to effectuate the general purpose of the contract, which is to indemnify the insured for the loss of time by reason of incapacity to perform his usual work or carry on his usual business by reason of a happening covered by the policy. . . . There are two lines of authority relating to cases of this kind, one tending to literalism, and the other applying the principle of liberal construction. The authorities which incline to strict interpretation are seemingly in the minority, and this court is committed to the more liberal doctrine. . . . Where a provision in a policy is susceptible of two or more constructions, the courts will adopt that construction which is most favorable to the insured. . . . . Under this policy, any reasonable person would have expected substantial protection, and would never have thought of the disability as one which must incapacitate him to earn the smallest sum in any possible manner. . . . "Total disability," irrespective of the technical variations in the language employed, should be given a rational and practical construction. . . .We are unwilling to adopt . . . a doctrine, the effect of which would be . . . to reduce all such contracts to nullities, and to make them the instruments of extracting dues from policy holders without creating any liability on the part of the insurers. . . . Under defendant's theory, the plaintiff might embark in the peanut trade or follow the business of selling shoestrings or lead pencils, or follow some similar calling . . . . [S]uch was not within the contemplation of the parties. In order to carry out the intent of the parties, it is our duty to disregard the broad language used which would have the effect to defeat the purpose of the contract and render it a nullity. (emphasis supplied)

Likewise, in Metropolitan Life Ins. Co. v. Johnson, 194 Ga. 138, 20 S.E.2d 761 (1942), the court held for the insured, a TB victim who was unable to continue operating his store but managed the Elks Club. He was "not performing any substantial part of the duties of his former employment or duties of a similar nature, and cannot be deprived of total disability benefits by reason thereof." 20 S.E.2d at 762.

A leading scholarly commentator on insurance law has explained the "reasonable expectations" principle as follows:

The objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations. R. Keeton, "Insurance Law Rights at Variance with Policy Provisions," 83 Harv.L.Rev. 961, 967 (1970).

Georgia courts have followed this standard in construing insurance contracts to protect the reasonable expectations of the insured. See, e.g., Georgia Farm Bureau Mut. Ins. Co. v. Meyers, 249 Ga.App. 322, 548 S.E.2d 67 (2001); Ga. Farm Bureau &c. Ins. Co. v. Huncke, 240 Ga.App. 580-581, 524 S.E.2d 302 (1999); Anderson v. Southern Guaranty Ins. Co. &c., 235 Ga.App. 306, 309, 508 S.E.2d 726 (1998).

Ambiguity in an insurance contract is duplicity, indistinctiveness, uncertainty of meaning of expression, and words or phrases which cause uncertainty of meaning and may be fairly construed in more than one way. Allstate Ins. Co. v. Grayes, 216 Ga. App. 419, 422(3), 454 S.E.2d 616 (1995).

Where a term of a policy of insurance is susceptible to two or more constructions, even when such multiple constructions are all logical and reasonable, such term is ambiguous and will be strictly construed against the insurer as the drafter and in favor of the insured. O.C.G.A. § 13-2-2(5); Ga. Farm &c. Ins. Co. v. Huncke, supra at 580, 524 S.E.2d 302; Peachtree Cas. Ins. Co. v. Kim, 236 Ga.App. 689, 690, 512 S.E.2d 46 (1999); Cole v. Life Ins. Co. &c., 236 Ga.App. 229, 511 S.E.2d 596 (1999). Where the phrasing of the policy is so confusing that an average policyholder cannot make out the boundaries of coverage, the policy is genuinely ambiguous. Ga. Baptist Children's Homes &c. v. Essex Ins. Co., 207 Ga.App. 346, 347(1), 427 S.E.2d 798 (1993).

Exceptions and exclusions to coverage must be narrowly and strictly construed against the insurer and liberally construed in favor of the insured to afford coverage. Nationwide Mut. Fire Ins. Co. v. Erwin, 240 Ga.App. 816, 817, 525 S.E.2d 393 (1999). "[T]he absence of an express provision must be strictly construed against [the insurance company] and in accordance with the reasonable expectations of [the lay insured]." Jefferson-Pilot Life Ins. Co. v. Fraker, 234 Ga.App. 430, 507 S.E.2d 188 (1998); Duncan v. Integon General Ins. Corp., 267 Ga. 646, 482 S.E.2d 325 (1997).

One of the most eloquent court opinions on reasonable expectations of policyholders, Lehrhoff v. Aetna Cas. and Sur. Co., 638 A.2d 889 (N.J.Super.A.D.,1994). In discussing the reasonable expectations of an insured in an automobile policy, the court found a particular provision was:

so well-hidden that only a determined, persistent and experienced reader knowing precisely what information he is seeking would be able even to find the applicable sections of the policy. . . . [An] ... insurance policy is a bulky document, arcane and abstruse in the extreme to the uninitiated, unversed and, therefore, typical policyholder. . . . We deem it unlikely that . . . the average . . . policyholder would then undertake to attempt to analyze the entire policy in order to penetrate its layers of cross-referenced, qualified, and requalified meanings. Nor do we deem it likely that the average policyholder could successfully chart his own way through the shoals and reefs of exclusions, exceptions to exclusions, conditions and limitations, and all the rest of the qualifying fine print, whether or not in so-called plain language.

The court in Lehrhoff went on to discuss the reasonable expectations rule as having been "developed over the years to protect insureds from . . . the insurance industry's 'unholy mantra' of 'we collect premiums; we do not pay claims.'" To that end,

[w]hen members of the public purchase policies of insurance they are entitled to the broad measure of protection necessary to fulfill their reasonable expectations. They should not be subjected to technical encumbrances or to hidden pitfalls and their policies should be construed liberally to the end that coverage is afforded "to the full extent that any fair interpretation will allow." [Citations omitted]. An important corollary of the reasonable-expectation doctrine, at least in respect of the consumer market, is that reasonable expectations will, in appropriate circumstances, prevail over policy language to the contrary. 638 A.2d 892-3

See also, Universal Underwriters Ins. Co., Recreational Products Ins. Div. v. New Jersey Mfrs. Ins. Co., 690 A.2d 1104, 1110-11 (N.J.Super.A.D. 1997), holding that, "it is the declaration page, the one page of the policy tailored to the particular insured and not merely boilerplate, which must be deemed to define coverage and the insured's expectation of coverage." While not a Georgia case, it is consistent with the reasonable expectation rule under existing Georgia law discussed above.

A federal court win for the home team was just published at Giddens v.The Equitable Life Assurance Society of the United States, 356 F.Supp.2d 1313(N.D.Ga.,2004) [Westlaw $$$].

We represented a dentist / real estate developer on a disability insurance claim after he had liver failure requiring a liver transplant at the Mayo Clinic. The insurance company took the position that during a long period of inability to work due to undiagnosed illness prior to diagnosis of liver failure, he abandoned both of his occupations, and therefore no longer had an occupation from which to become disabled. We won summary judgment before the Honorable Richard Story, U.S. District Judge in Atlanta.

The case is significant because it established Georgia precedent on (1) admissibility of disability opinions of treating physicians under Daubert despite lack of definitive tests and specialization in disability evaluation, with any deficiency going to weight rather than admissibility; and (2) rejection of insurer's "occupation defense" that insured who was unable to work for extended time due to illness had abandoned occupation and therefore had no occupation from which to become disabled.

The insurer has filed an appeal pending in 11th Circuit Court of Appeals. We hope the appeal produces a published decision affirming Judge Story's order, which other policyholders may use as precedent against The Equitable throughout the United States.

See the published order below:

The most quoted and least meaningful phrase we hear about automobile insurance is, "I've got full coverage." People who say that generally turn out to have insurance agents who failed to inform them of what they need, and their coverage is generally the minimum amount of insurance required by state law.

This post discusses the minimum liability coverages required by Georgia law, uninsured / underinsured motorist (UM) coverage, medical payments coverage, collision coverage, and the rudiments of bad faith penalties.