Plaintiffs continue to probe the limits of bankruptcy court injunctions, an effort that is even more interesting while the Second Circuit’s GM decision makes it way up to SCOTUS. As to the probes, this week brought two new rulings in the WR Grace chapter 11 proceedings. One partially succeeded and one did not succeed at all. Both sets of claims were direct action “failure to warn” claims against insurers that provided workers’ compensation insurance to WR Grace for the Libby Montana manufacturing plant, which included vermiculite processing. The two opinions do not address any due process issues, or whether there was any actual effort to protect the rights of the claimants. Instead, the opinions proceed on the assumption that section 524(g) injunctions are proper. From that perspective, the court barred direct action claims against CNA but allowed direct action claims against Maryland Casualty. The opinions are in many ways identical and the differing outcomes depend on the wording of particular documents from the final chapter 11 plan. The CNA opinion is here and the Maryland Casualty opinion is here.
It took some time, but 50 indictments finally emerged for the engineering firm hired by property damage insurance company lawyers to knock down damages for policyholders crushed by Superstorm Sandy. It’s good to see fraud prosecuted, regardless of which side is committing the fraud. Interestingly, however, the insurance industry and the US Chamber of Commerce have not covered the story (that I can find) despite the fact that alleged fraud in litigation is one of their favorite topics.
These indictments arose because in part because a determined judge ordered some hearings, looked across a larger group of cases, and issued a detailed opinion. Media coverage followed. Then more judges became involved and issued more findings. It’s good to see judges speak out when they see corruption in litigation.
Garlock’s “plaintiff’ fraud” claims apparently will not be tested on the merits in Kentucky as it just lost an intermediate court appeal. Like the trial court, the appellate court tossed the case based on statute of limitations grounds. There, the jury apportioned fault among some 20 defendants, but Garlock alleged that a different four were key, and that plaintiff failed to do enough to help Garlock with its case investigation. The Goldberg Segalla blog includes a March 7, 2016 post that provides a more detailed summary of the case, and a link to the new opinion.
No doubt the posturing and litigation will continue as both sides jockey for position. For some commercial general liability insurers, yelling “fraud” has been a them for some years now, and no doubt they will continue yelling fraud for many more years, except when some get caught defrauding insureds.
The discovery wars of tomorrow will include plaintiffs seeking access to existing and future analytic and predictive databases and models operated by insurers. Why? In part because the insurers are further ramping up the use of predictive analytics, according to a March 1, 2106 article in Carrier Management. A key excerpt from its states:
“Some additional predictive modeling findings from the survey [of insurance companies]:
- About 28 percent of respondents said they’d use predictive modeling for fraud potential. That will jump to 70 percent in two years.
- Approximately 10 percent said they use the technology to calculate litigation potential. That jumps to 61 percent two years from now.
- While 18 percent said they rely on the tech for marketing and advertising, that number grows to 52 percent in two years.
- 42 percent said that big data helps with pricing, underwriting and risk selection, but 77 percent expect it to do so within two years.
- 60 percent said they expect big data to help inform their management decisions two years from now, up from 19 percent today.
- 58 percent said they envision big data helping their loss control and claims management within two years versus 17 percent now.”
Asbestos litigation keeps on going. Indeed, a couple of weeks ago, AM Best put out yet another iteration of its annual report on asbestos and pollution reserves of liability insurers. Rather like the Federal Reserve’s messaging on interest rates, AM Best’s release appeared to include messaging about asbestos reserves of the insurance industry. The message? In 2016, AM Best “probably” will take a fresh look at asbestos reserves at insurance companies, with hints of what it may say. For example, consider the following statements from the press release:
“The Best’s Special Report, titled, “Asbestos & Environmental Losses Drop Sharply in 2014, But Funding Level Concerns Remain,” notes that given the consistent and high level of paid and incurred losses, this unfunded estimate may be low.”
“With more than 80% of total industry A&E liabilities composed of asbestos losses, asbestos continues to be the “main event” when discussing A&E exposures. A.M. Best continues to monitor issues related to asbestos litigation and insured exposures with an eye toward a possible re-visiting of its $85 billion estimate of ultimate industry losses during 2016.”
That’s a long winded introduction to part of why there is a webinar next week (Thursday Nov. 19) on asbestos science and insurance industry reserves. The panel consists of our multi-disciplinary group that wrote a white paper this summer on those topics. As explained by actuary and insurance industry analyst Bill Wilt:
“Rating agency A.M. Best recently increased their estimate of the industry’s ultimate losses for asbestos to $85 billion, and for many years the insurance industry has been in a pay-as-you-go mode; both paying and accruing some $2 billion annually for asbestos liabilities. When will it end; or, will it end?”
Kirk Hartley – Founder, LSP Group, LLC
David H. Schwartz, Ph.D. – Head of Scientific Support to Counsel, Innovative Science Solutions, LLC
William Wilt, CFA – President, Assured Research, LLC
Summary of why multi-disciplinary teams are necessary to see beyond “the data”
Recent developments in the legal perspective
Overview of the scientific and medical perspective
Factors that combine to influence/alter traditional actuarial techniques in use today
Continuing education credits:
CFA Institute – 1.5 hours • CPE credits – 1.5 hours • Details available online
Webinar: New Science and Law in Asbestos Litigation
November 19, 2015 • 1:00-3:30 p.m. ET
Who recently said insurers are under-reserved for asbestos litigation despite several years of increasing reserves ? The multi-disciplinary team of Hartley, Wilt, Schwartz and Ciavarra, in our white paper from late this summer on asbestos science and litigation. CNA made us look good a couple of weeks later when it raised its asbestos loss numbers, which flow through Buffet/Berkshire. The market, it was said, had not seen that coming.
Now, Travelers has once again raised its reserves for asbestos litigation. This year’s increase of $ 224 million was identified in an October 20, 2015 press release. The pertinent portion of the press release states:
“Net favorable prior year reserve development primarily resulted from (i) better than expected loss experience for the property product line related to catastrophe losses for accident years 2011, 2012 and 2014 and non-catastrophe losses for accident years 2013 and 2014, (ii) better than expected loss experience in the general liability product line for both primary and excess coverages for accident years 2005 through 2013, reflecting a more favorable legal environment than the Company previously expected, (iii) better than expected loss experience in the workers’ compensation product line for accident years 2005 and prior and (iv) better than expected loss experience in the Company’s operations in Canada, partially offset by (v) a $224 million pre-tax increase to asbestos reserves.
The asbestos reserve strengthening, which resulted from our annual in-depth asbestos claim review that was completed in the third quarter, was driven by increases in the Company’s estimate for projected settlement and defense costs related to a broad number of policyholders. The increase in the estimate of projected settlement and defense costs resulted from recent payment trends that continue to be higher than previously anticipated. While the overall view of the underlying asbestos environment is essentially unchanged from recent periods, there remains a high degree of uncertainty with respect to future exposure to asbestos claims.”
An August 3, 2015 story in Insurance Insider reports a notable new $150 million second quarter charge taken by CNA for asbestos litigation. The full story is behind a paywall, here. Last year, CNA took a $479 million charge.
According to the story, “the market” did not see this coming. Perhaps “the market” needs to figure out that asbestos litigation is far from over, and start digging into the details, such as the multi-disciplinary white paper a group of us published last month on asbestos science and law.
Here’s the bottom line part of the CNA and Berkshire story for those in asbestos litigation:
“US-listed carrier CNA saw operating profits halve in the second quarter after a retroactive reinsurance charge relating to its legacy asbestos deal with Berkshire Hathaway impacted the company’s bottom line.
Second quarter operating income totalled $132mn, or $0.49 a share – well below Wall Street analysts’ forecasts of $0.81 a share. The result was also significantly short of the $272mn, or $1.00 a share, of profits generated in the prior-year period.
This came as the ultimate expected loss on the CNA asbestos portfolio reinsured by Berkshire Hathaway in 2010 widened from $2.49bn to $2.64bn. The carrier incurred an additional $150mn of adverse development during the second quarter, which will ultimately be footed by Berkshire Hathaway.
This is $419mn more than the $2.2bn consideration that CNA paid to Berkshire Hathaway in 2010, when it agreed a loss portfolio transfer that saw the conglomerate accept $1.6bn of net liabilities and any deterioration up to an aggregate reinsurance limit of $4.0bn.”
Advocates of damages caps in medical malpractice cases seldom, if ever, confront the gross unfairness of leaving on one person the economic burden of a medical error. That risk instead can and should be spread to many since actuaries say they can predict the general patterns of medical treatments and error rates, and can provide even more precise predictions if provided with more detailed information. See, for example, this 2009 article in Contingencies (ISSN 1048-9851), which is published by the American Academy of Actuaries, 1100 17th St. NW, 7th floor, Washington, DC 20036. One of the authors is “Kevin L. Bingham, a senior manager at Deloitte Consulting LLP in Hartford, chairperson of the Medical Malpractice Subcommittee and an official spokesperson for the American Academy of Actuaries in Washington.” The other author is John Lucker, , who “is a principal at Deloitte Consulting LLP in Hartford and national co-leader of Deloitte’s Advanced Quantitative Services Practice (Data Mining & Predictive” [Services]).
In view of those realities, occasionally I publish examples of high value medical malpractice verdicts and/or settlements. Here’s a new example from Cook County from the July 1, 2015 issue of the Chicago Daily Law Bulletin (paywall). In light of the educational point of this post, I take the “fair use” liberty of republishing the full article in case anyone wants to cite it or fact check it with the involved lawyers.
“$23M settlement for childbirth injuries
By John Flynn Rooney
Law Bulletin staff writer
A suburban hospital and doctor will pay $23 million to the estate of a mother who suffered a stroke after childbirth and is now a quadriplegic.
The settlement is a record in Illinois for a birth-related injury to a mother.
Cook County Circuit Judge James N. O’Hara entered an order on Friday approving the settlement — the bulk of which will be paid by Westlake Hospital in Melrose Park — and dismissed the lawsuit involving the estate of Faviola Ochoa.
On June 21, 2010, Ochoa, then 34, was admitted to Westlake in labor.
Following blood testing performed shortly after Ochoa’s admission, she was diagnosed with HELLP syndrome, a severe form of pre-eclampsia — a dangerous pregnancy complication consisting of high blood pressure and high levels of protein in her urine.
HELLP syndrome causes ruptured blood cells, elevated liver enzymes and low platelet levels.
As Ochoa’s labor progressed, she developed hypertension. After delivering a healthy baby boy, Ochoa continued to experience periodic severe hypertension, and her platelet levels fell to below normal.
She received an anti-hypertensive medication. But she suffered a stroke early on June 22.
She was then transferred to Rush University Medical Center for surgery to relieve bleeding on the brain.
Ochoa suffered brain damage due to a lack of oxygen and was rendered a quadriplegic, said Thomas G. Siracusa, a Power, Rogers & Smith P.C. partner who represented Ochoa’s estate with fellow partner Joseph W. Balesteri. She’s unable to speak, relies on a ventilator to breathe and can only eat using a feeding tube.
“She suffered a hypertensive bleed that could have been avoided with adequate management of her blood pressure,” Siracusa said.
At the time of the delivery, Dr. Joseph J. Furlin was Ochoa’s obstetrician.
In 2011, a lawsuit was filed on Ochoa’s behalf in Cook County Circuit Court. The hospital and Furlin were named as defendants.
The complaint alleged that the hospital’s staff nurses and nursing supervisors failed to follow the chain of command to ensure that Ochoa receive the proper medical care she required.
Furling allegedly failed to administer the proper doses of anti-hypertensive medication and failed to address Ochoa’s decreasing platelet levels.
Marilee Clausing and Charles C. Bletsas, partners at Hall, Prangle and Schoonveld LLC, represented Westlake Hospital. Clausing could not be reached for comment.
Furling was represented by Mark M. Burden and Michael J. Borree, both partners at Donohue, Brown, Mathewson & Smyth LLC. Neither could be reached for comment.
Attorneys for the hospital and doctor argued that Ochoa’s blood pressure never reached the levels that required treatment or placed her in danger of bleeding.
The parties settled the case in early April after two mediation sessions with Donald P. O’Connell, the former chief judge in Cook County.
Westlake Hospital will pay $22 million toward the settlement with a combination of self-insurance money and proceeds under an insurance policy. Furling will pay $1 million — his insurance policy limit.
The settlement is a record for a mother injured in childbirth, said John L. Kirkton, editor of the Jury Verdict Reporter, a division of Law Bulletin Publishing Company. The previous high settlement for a birth injury to a mother was $15 million last year in a Cook County Circuit Court wrongful-death case.
Ochoa, her husband, Jose, and their four children live in an apartment building in Melrose Park. Ochoa’s husband and her sister are her current primary caregivers.
The settlement will allow Ochoa to receive 24-hour care and regular physical therapy sessions, Siracusa said. The family plans to move into a handicapped-accessible home.
“This (HELLP) is a syndrome that requires intensive monitoring and aggressive management,” Siracusa said. “A wait-and-see approach can have devastating consequences.”
The case is Jose L. Ochoa, et al., v. Joseph J. Furlin, et al., 11 L 3900.
Access to “big data” is important to multiple aspects of claiming and payments systems. For example, secrecy in data helps some health insurance companies avoid analysis and compilation of data on how often they deny access to stem cell transplants to persons with cancer. Blocking access to data also helps health insurers make it harder for patients and/or doctors to learn if they’ve been systematically cheated out of payments. Similarly, some property damage insurers seek to block access to “data” on claims and payments after “big storms,” and rewriting of expert reports to deny payments to persons with damaged property. Secrecy also is thought to help litigants on all sides of many issues as they try to take advantage of actual or perceived asymmetries in access to information. In view of these realities, it is therefore no surprise that litigants on all sides tend to seek and argue for data secrecy that blocks access by groups interested in examining “big data” for whatever it may reveal about claims for and payments of money.
Sadly, the desire for secrecy is especially strong among the asbestos bankruptcy trusts that hold the most “big data” on asbestos claiming. This is especially frustrating because once upon a time, David Austern (of the Manville Trust) and some other trusts actively disseminated the “big data” they held on asbestos claiming. Indeed, back in 2009, I described in detail the Manville Trust’s regrettable retreat into secrecy through actions of its Trustees (not David), and cited to some of the obligatory references on the value of sunlight.
It is easy to doubt that society benefits from secrecy on the longest running and most costly “mass tort” in history, which in general has failed to serve the interests of “future claimants.” In other contexts, the federal government and others seek to increase disclosure of big data to encourage more intelligent and wide-spread scrutiny of claiming and payments for systems intended to serve the interests of current and future claimants. Indeed, back in 2010, the Obama Administration announced plans to release Medicare data so that private “bounty hunters” could root out fraud, as described in a March 29, 2010 article at FierceHealth IT . More recently, much more Medicare data was released, and the Obama Administration (CMS) June 1, 2015 statement went on at length as to the virtues of releasing massive amounts of Medicare data for analysis by interested persons. There, CMS explained the following regarding the vast scale and scope of Medicare data disclosures:
“As part of the Administration’s efforts to promote better care, smarter spending, and healthier people, today CMS is posting the third annual release of the Medicare hospital utilization and payment data (both inpatient and outpatient) and the second annual release of the physician and other supplier utilization and payment data. The announcement was made at the annual Health Datapalooza conference in Washington, DC.
“These data releases will give patients, researchers, and providers continued access to information to transform the health care delivery system,” said acting CMS Administrator Andy Slavitt. “It’s important for consumers, their providers, researchers and other stakeholders to understand the delivery of care and spending under the Medicare program.”
The Medicare hospital utilization and payment data consists of information for 2013 about the average amount a hospital bills for services that may be provided in an inpatient stay or outpatient visit. The hospital data includes payment and utilization information for services that may be provided in connection with the 100 most common Medicare inpatient stays and 30 selected outpatient procedures at over 3,000 hospitals in all 50 states and the District of Columbia. The top 100 inpatient stays represented in the hospital inpatient data are associated with approximately $62 billion in Medicare payments and over 7 million hospital discharges.
The Medicare Part B physician, practitioner, and other supplier utilization and payment data consists of information on services and procedures provided to Medicare beneficiaries by physicians and other healthcare professionals. The data also shows payment and submitted charges, or bills, for those services and procedures by provider. It allows for comparisons by physician, specialty, location, types of medical services and procedures delivered, Medicare payment, and submitted charges. The new 2013 dataset has information for over 950,000 distinct health care providers who collectively received $90 billion in Medicare payments. Hospitals, physicians, and other health care providers determine what they will charge for services and procedures provided to patients and these “charges” are the amount the hospital or provider generally bills for the service or procedure, but the amount paid is determined by Medicare’s physician fee schedule or other payment methodologies. CMS protects beneficiaries’ personal information in all its data releases.
“Data transparency facilitates a vibrant health data ecosystem, promotes innovation, and leads to better informed and more engaged health care consumers,” said Niall Brennan, CMS chief data officer and director of the Office of Enterprise and Data Analytics. “CMS will continue to release the hospital and physician data on an annual basis so we can enable smarter decision making about care that is delivered in the health care system.”
The Administration has set measurable goals and a timeline to move Medicare toward paying providers based on the quality, rather than the quantity, of care they give patients. These data releases are part of a wide set of initiatives to achieve better care, smarter spending, and healthier people through our health care system. Open sharing of data securely, timely, and more broadly supports insight and innovation in health care delivery.
Today’s data release adds to the unprecedented information recently released on Medicare Part D prescription drugs prescribed by physicians and other health care providers.”
Yogi Berra probably never dreamed of the number of times his line would reused. In any event, it applies well to insurance companies dancing around coverage issues for benzene litigation, as they’ve done many times in asbestos litigation. HarrisMartin’s Benzene publication provides an example (paywall) in a June 4, 2015 article. The summary provided in the article (see below) reads as if the arguments were lifted directly from brief on asbestos coverage issues:
“Continental and National Union issued commercial general liability policies to Valspar between 1971 and 2004. In 2006, Continental began incurring costs associated with the defense of Valspar in four benzene lawsuits alleging exposure to products manufactured by the company. The lawsuits implicated policies issued by both insurers based on the alleged exposures, which occurred between 1966 and 1990.
Continental sued National Union, seeking contribution under a theory that it owed Valspar a duty to defend against the underlying benzene claims and therefore had an equitable obligation to contribute to defense costs incurred by another insurer in connection with the lawsuits.
In March 2013, the court awarded partial summary judgment to Continental, determining that National Union had a duty to defend Valspar and, as a result, a duty to contribute to defense costs incurred by Continental. However, the court’s ruling left open the question of how much National Union was required to reimburse Continental.”