Commercial Litigation Blog

Exchanging Information Between Insurers in Claims/SIU Investigations

Sat, 17 Dec 2011 12:50:00 GMT

Does the Health Insurance Portability and Accountability Act (HIPAA) or Graham-Leach-Bliley Act (GLBA) make you apprehensive about sharing claims information with other carriers? Consider these links below when evaluating whether or not to send claims documents and even medical records to another insurance carrier:

HIPPA
FAQ's - hhs.gov/hipaafaq/providers/covered/

The HIPAA Administrative Simplification regulations specifically exclude from the definition of a “health plan” any policy, plan, or program to the extent that it provides, or pays for the cost of, excepted benefits, which are listed in section 2791(c)(1) of the Public Health Service Act, 42 U.S.C. 300gg-91(c)(1). See 45 CFR 160.103. As described in the statute, excepted benefits are one or more (or any combination thereof) of the following policies, plans or programs:
•   Coverage only for accident, or disability income insurance, or any combination thereof.
•   Coverage issued as a supplement to liability insurance.
•   Liability insurance, including general liability insurance and automobile liability insurance.
•   Workers’ compensation or similar insurance.
•   Automobile medical payment insurance.
•   Credit-only insurance.
•   Coverage for on-site medical clinics
•   Other similar insurance coverage, specified in regulations, under which benefits for medical care are secondary or incidental to other insurance benefits.

GLBA

15 USC §6821 (e) Non-applicability to insurance institutions for investigation of insurance fraud. ftc.gov/privacy/glbact/

No provision of this section shall be construed so as to prevent any insurance institution, or any officer, employee, or agency of an insurance institution, from obtaining information as part of an insurance investigation into criminal activity, fraud, material misrepresentation, or material nondisclosure that is authorized for such institution under State law, regulation, interpretation, or order.

Richmond Circuit Court Addresses Meaning Of “Regularly Conducting Substantial Business Activity” Language In Venue Statute

Sat, 17 Dec 2011 12:51:00 GMT

In 2004, the Virginia General Assembly changed Section 8.01-262, the “venue” statute, so as to require a showing that a defendant “regularly conducts substantial business activity” in a chosen venue when a plaintiff elects to bring their lawsuit in a different city or county from where the accident happened or where the defendant lives. In the years following this amendment, the meaning of “regularly conducting substantial business activity” has been subject to different interpretations.

A recent decision by Judge Melvin Hughes of the City of Richmond Circuit Court provides some guidance as to the type of factual support courts are looking for to establish that a defendant is “regularly conducting substantial business activity”. Duncan v. Brannock, et al. involved a legal malpractice claim against a Staunton, Virginia law firm filed in the City of Richmond Circuit Court. The defendant law firm objected to the case being filed in Richmond. In opposing the law firm’s motion to have the case transferred, the plaintiff offered evidence that one of the law firm’s partners conducted 40% of his practice in worker’s compensation which involved appearances before the Virginia Worker’s Compensation Commission in Richmond, as well as appearances before the Virginia Court of Appeals, also based in Richmond. In addition, the law firm made occasional appearances in the United States Court of Appeals-Fourth Circuit, the Virginia Supreme Court, and the United States District Court for the Eastern District of Virginia, all based in the City of Richmond.

Judge Hughes pointed out that the time frame for determining whether a defendant regularly conducts substantial business activity is at the time the lawsuit is filed. He held that the above recited activities of the defendant law firm were insufficient to establish that they regularly conducted business in Richmond. Citing an earlier Virginia Supreme Court case, Meyer v. Brown, he stated that “regularly” meant “doing business in a steady, methodical, uniform way”. Based upon the evidence of the law firm’s business activity within the City of Richmond, these contacts were simply not regular and systematic enough for the case to remain in the Richmond Circuit Court, and the defendant’s motion to transfer was granted.

Insurance Fraud

Sat, 17 Dec 2011 12:52:00 GMT

A lawyer shall not “present or threaten to present criminal or disciplinary charges solely to obtain an advantage in a civil matter.” Virginia DR 3.4(h).   The DR’s, Discliplinary Rules to the rest of civilized society, govern lawyer conduct. This particular Rule exists because the stigma associated with criminal or disciplinary charges could override a person’s desire to pursue a rightful claim for civil relief. But, when does advising an adversary of the potential ramifications of his actions cross the line to threatening criminal charges?

An attorney can advise his own client to pursue criminal charges against an adversary. The typical situation arises with the bounced check. Filing suit against a party bouncing a check leaves your client with a judgment and a lot of draconian, time consuming debt collection measures. Advising your client that bouncing a check is a crime and suggesting to your client that he take the bad check to the Commonwealth’s Attorney does not involve threatening an adversary and probably gets better results than a civil suit. Faced with criminal charges, the check bouncer may pay up quicker or have Court-ordered restitution as part of his sentence.

But, how does this ethics rule impact an insurance fraud investigation? For instance, in Virginia, all claim forms must contain a statement that “it is a crime to knowingly provide false, incomplete or misleading information to an insurance company . . .” Va. Code Ann. §52-40. An Examination Under Oath (E.U.O.) transcript that an insured must sign, correct and notarize may fall into the undefined term of “claim form” so, at some point, this warning must show up. Does the examining attorney verbally advise the insured on the record of this statutory language or slap a sticker with this language on the outside of the transcript when sent to the insured for signing?   Is the attorney “threatening criminal prosecution” in violation of the Disciplinary Rule in either instance?

Advising an insured of statutorily required language does not violate the letter of the rule. The attorney citing this language is not threatening “solely to obtain an advantage in a civil matter.” An attorney need only to point at the statute for support for his purpose. The attorney should explain why such language is put in the record by citing the relevant statute.

Often, after an insurer denies a claim, the adjuster demands that the attorney report the fraud to the proper authorities. The attorney can report the crime of insurance fraud. Reporting the crime involves communication to the authorities and not a threat directed towards the insured to gain an advantage in the claims investigation.

But, the American Bar Association actually suggests that such behavior may be acceptable. In Ethics Opinion 90-363 the ABA determined that the Model Rules allow an attorney to threaten criminal charges to gain an advantage in a civil matter if the criminal charges relate to the civil matter, the attorney has a “well-founded belief” that both the civil and criminal charges have a reasonable basis in the law and facts of the case and the attorney does not try to improperly influence the criminal end of the case. In fact, the ABA even allows settlement terms to include an agreement not to report criminal conduct. The ABA makes sure to say in this Opinion that this is just their “opinion” and that everyone needs to consult their local laws and Disciplinary Rules for how to act ethically.

Under the ABA “opinion,” pushing a Claim Withdrawal form towards an insured and suggesting that jail time is likely unless the claim is withdrawn is acceptable. The Virginia State Bar, however, would find such conduct reprehensible and would take the threatening attorney to task, as well they should. Insurance claims, indeed all claims, should be resolved on its merits, not by inducing fear in an insured through heavy-handed threats.

Commercial Litigation

Sat, 17 Dec 2011 12:52:00 GMT

Over the years, I have handled thousands of cases in Virginia, Maryland, West Virginia, and Washington DC for various corporate and commercial clients, ranging from countless Fortune 500 corporations to local business with one location. Regardless of whether the cases involve retail or restaurant clients, construction defect claims, or products liability cases, the issues and concerns that consistently arise on the defense side are markedly different from the issues that influence the plaintiff. Whether the case is in the Mid-Atlantic region or anywhere else across the country, it is critical that the corporate brand be protected on a grand scale, and that the proprietary interests of the company by closely guarded.

Managing discovery is often the most challenging and important part of a defending a corporate client. Not only can the disclosure of sensitive documents threaten corporate secrecy, but discovery requests can often be costly and time consuming if not properly controlled. This becomes even more of an issue with the new federal rules on electronic discovery. It is critical that defense counsel understand what information his client has readily available, and what resources are required to respond to certain requests. Defense counsel must be vigilant and timely in filing objections, yet reasonable enough to work with opposing counsel to limit the scope of discovery to reasonable parameters without forcing costly and unproductive discovery disputes. At the same time, counsel should have a standard practice of labeling, identifying and producing documents under protective orders to track their production and ensure that sensitive documents do not make their way into the public domain. The last thing I want to see happen is the private operating procedures or policies of my client in a case in Richmond be posted on the internet or shared with another attorney handling another case in Fairfax or Roanoke. While the specific fact patterns in falling merchandise cases, slip and falls, defective product displays, and food borne illness cases always differ, the underlying policies and procedures of a company are typically general enough that the same corporate policies in one case may be at issue in another case. Therefore, it is critical that defense counsel take appropriate action to protect those documents and ensure that they are not duplicated or kept beyond the period required by litigation.

On another level, the frequency of litigation is also an issue to consider. Whereas an individual may go through their entire life only being involved in one lawsuit, a corporation may find itself in litigation hundreds of times in a calendar year. Because of the regular appearance in the court process, a corporation faces much greater potential of impeachment from taking inconsistent positions in any given case. One of the worst things that can happen in litigation is to have what was testified to or provided in one case to be used against the corporation in another case. In essence, the corporation may impeach itself by taking inconsistent positions in different cases. If a corporate designee testifies on a topic in a deposition in Norfolk, Virginia, it is critical that his testimony not expose the company to an argument in litigation in Maryland, West Virginia or anywhere else. Therefore, defense counsel must ensure that the proper designee selected, that he or she is fully prepared to testify, not just based on the issues of the instant case, but based on how his or her testimony may affect another case. Certainly, protective orders can play a large role in minimizing this risk, but practically, it is a much more difficult to control a deposition transcript than a corporate document that is provided by counsel.

In the end, while defending the plaintiff’s claim is always the significant factor in successfully defending a corporation, defense counsel must not defend one case at the risk of increasing exposure in another case. Having defense counsel who understand such nuances and are sensitive to the needs of a corporate client helps make the difference in capable and exceptional defense counsel.