Wednesday, February 9, 2011

SC Lawmakers look to screw SC residents with new bill

SC Lawmakers are set to take up a bill today that would serve two purposes: to protect the profits of insurance companies and screw over South Carolinians who had suffered horrible injury.

According to the AP's Meg Kinnard:

COLUMBIA, S.C. (AP) - Lawmakers in South Carolina are to consider plans to set new limits on the amount of punitive damages that can be awarded in lawsuits.

The South Carolina House plans Wednesday to debate a measure that would limit people winning lawsuits to either a maximum punitive damage award of $350,000 or three times the actual damages awarded.

The measure has been a top priority for House Republicans this year.

The House passed a similar measure last year, but it died in the Senate.

The legislation also sets new requirements for the state's attorney general and local solicitors to disclose details of contracts with outside lawyers and imposes limits on fees they can be paid. For instance, they could receive no more than 4 percent of a $100 million settlement.
The insurance agency has been pushing the red herring of tort reform for years as a cure for spiraling-out-of-control healthcare costs. It's complete bullshit.

The health economists and independent legal experts who study the issue,
however, don’t believe that’s true. They say that malpractice liability costs
are a small fraction of the spiraling costs of the U.S. health care system, and
that the medical errors that malpractice liability tries to prevent are
themselves a huge cost– both to the injured patients and to the health care
system as a whole.

“It’s really just a distraction,” said Tom Baker, a
professor at the University of Pennsylvania Law School and author of “The
Medical Malpractice Myth.” “If you were to eliminate medical malpractice
liability, even forgetting the negative consequences that would have for safety,
accountability, and responsiveness, maybe we’d be talking about 1.5 percent of
health care costs. So we’re not talking about real money. It’s small relative to
the out-of-control cost of health care.”


“If you were to list the top five or ten things that you could do to bring down
health care costs that would not be on the list,” said Michelle Mello, a
professor of Law and Public Health at Harvard.

Politicians of both parties have been pushing for years the idea that reducing "runaway" jury "lottery" verdicts will somehow lower healthcare costs. First, there is not some epidemic of runaway lottery verdicts going on. Those that happen, are rare and subject to appeals if they are not substantiated by the facts of the particular case. But when they do happen, there's a reason. Take the recent SC case of Jerome Mitchell v. Fortis Insurance Co. (now known as Assurant). In 2004, a jury here in Florence awarded Mitchell $36,000 on his breach of contract claim, $150,000 on his bad faith rescission claim and $15 million in punitive damages arising from the bad faith. The SC Supreme Court later upheld the verdict, but reduced the punitive damages award to $10 million. The bill SC lawmakers are taking up today doesn't think that kind of award is "right." Let's see if we can figure out what is "right."

Mitchell was a college student from right here in Florence whose mother had gotten him an insurance policy when he went off to school. As part of the application, Mitchell filled out a questionnaire. One questions was: “Been diagnosed as having or been treated for any immune deficiency disorder by a member of the medical profession?” Mitchell answered “no."

In April 2002, Mitchell attempted to donate blood to the Red Cross. On May 13, 2002, the Red Cross contacted Mitchell to inform him that his blood had screened positive for HIV. The Red Cross suggested Mitchell get a confirmation test from his personal physician, and Mitchell immediately contacted Dr. Michael Chandler. On May 14, 2002, Dr. Chandler’s tests confirmed that Mitchell was HIV positive. That day, one of Dr. Chandler’s assistants noted on Mitchell’s intake chart: “Gave blood in March – got letter yesterday stating blood tested [positive for] HIV.” The handwritten chart note identified Mitchell correctly as eighteen years old, but was erroneously dated May 14, 2001.
That simple scrivener's error was all Assurant needed to try to deny Mitchell his coverage. In fact, this is the summary generated by one of their underwriters stated:

The only question misrepresented on the Enrollment form is #20 – “Within the last 10 years has any proposed insured been diagnosed as having or been treated for any immune deficiency disorder.” Can’t use the question re: AIDS as he does not have AIDS, he has tested positive for the HIV virus. This is the only question I’ve found that we can use – any other suggestions?
Technically, we do not have the results of the HIV test. This is the only entry
in the medical records regarding HIV status. Is this sufficient?

In other words, "Look guys...I think we can get off the hook!"

On September 5, 2002, they informed Mitchell they were rescinding his policy because of a "material misrepresentation on his application form." The letter that informed of this decision also stated they would "welcome any additional information you may have which would effect (sic) our decision to rescind your policy." Mitchell, knowing he had not misrepresented anything tried to do just that, to no avail. Despite efforts by his medical providers to assist him by explaining to Assurant that Mitchell had in fact NOT tested positive for HIV until AFTER he had gotten his policy with them, Assurant did not care. "There was nothing they could do."

Mitchell, having been spurned at every turn trying to handle this his on his own, hired an attorney. The attorney sent Assurant copys of the doctor's initial test results along with a letter informing Assurant that Mitchell was first diagnosed with HIV until May 2002.

Assurant "reviewed" their rescission of the policy, which if anyone has never had the pleasure of administratively appealing an insurance company's denial of something simply consists of a few employees of the insurance company sitting around a table, "reviewing" the file, before promptly upholding the decision of the company. Shocker.

The trial judge in this case, the Hon. Michael G. Nettles summed up this review by stating: "There were no rules, no minutes, no notes, and in accordance with instructions from general counsel, not even a record of who was present." In fact, the only information we know was before the committee consists of a single notation that read: "letter from attorney stating that the insured did not misrep[resent] coverage since the first diagnosis of AIDS was 5/14/2002." How about this: this review committee considered 45 OTHER rescission cases during a 2-hour meeting. How thorough a review you think that was????

At trial, Mitchell's expert testified that it was the insurance company's practice to shut down an investigation once a single piece of evidence was discovered that would support rescission. Assurant's own people could not even answer whether or not they had the responsibility to find out the truth" about a policy holder's medical conditions. This despite the fact that Assurant's own expert admitted they had a duty to investigate and find information that may lead to payment of a claim. Mitchell also presented evidence that Assurant had tried to hide evidence of their bad faith by sending illegible copies of forms and by the fact that call logs did not show a call between the insurance company and one of Mitchell's health care providers (the call trying to explain he had not tested positive until after getting the policy). Judge Nettles found there to be evidence that the insurance company had concealed information through their practices, which overall, resulted in a "pattern of secrecy and concealment..."

According to an article by Murray Waas:

Previously undisclosed records from Mitchell's case reveal that Fortis had a company policy of targeting policyholders with HIV. A computer program and algorithm targeted every policyholder recently diagnosed with HIV for an automatic fraud investigation, as the company searched for any pretext to revoke their policy. As was the case with Mitchell, their insurance policies often were canceled on erroneous information, the flimsiest of evidence, or for no good reason at all, according to the court documents and interviews with state and federal investigators.

As Waas' article notes:

Nettles also suggested that Fortis should have realized the date in the note was incorrect: "Not only did Fortis choose to rely on one false and unreliable snippet of information containing an erroneous date to the exclusion of other information which would have revealed that date to be erroneous, Fortis refused to conduct any further investigation even after it was on notice the evidence which aroused its suspicion to be false," the judge noted.

Fortis "gambled" with Mitchell's life, Nettles wrote.

Their motive, according to the judge, was obvious: "The court finds that Fortis wrongfully elevated its concerns for maximizing profits over the rights and interest of its customer." In upholding Nettles' verdict, the South Carolina Supreme Court similarly ruled that "Fortis was motivated to avoid the losses it would undoubtedly incur in supporting Mitchell's costly medical condition."


an investigation last summer by the House Energy and Commerce Committee as well as earlier ones by state regulators in California, New York and Connecticut, found that thousands of vulnerable and seriously ill policyholders have had their coverage canceled by many of the nation's largest insurance companies without any legal basis. The congressional committee found that three insurance companies alone saved at least $300 million over five years from rescission. One of those three companies was Assurant.

The committee estimated that Assurant alone profited by more than $150 million between 2003 and 2007 from rescission.

Does anyone actually think an insurance company is going to be forced to stop such a practice if they get hit with $350k verdict given the type of "savings" described above? How about $1 million?

Feel free to click on these links and explore this case on your own, then decide what would be "right." The ability to allow juries to punish this type of conduct to the level that the punishment actually hurts some or "making our business climate more attractive" by limiting jury awards? When you do, keep in mind that testifying before Congress, Assurant's CEO had this to say about the insurance industry's rescission practices:

On June 16, 2009, the House Energy and Commerce Committee, held a hearing on the practice of rescission by health insurance companies, and among the industry executives who testified was Don Hamm, the CEO and President of Assurant Health.

Hamm insisted before the committee that rescission was a necessary tool for Assurant and other health insurance companies to hold the cost of premiums down for other policyholders. Hamm asserted that rescission was "one of many protections supporting the affordability and viability of individual health insurance in the United States under our present system."

He also suggested that those who had their policies rescinded by Assurant had attempted to intentionally mislead his company: "Unfortunately, there are times when we discover that an applicant did not provide complete or accurate medical information when we underwrote the risk," Hamm said.

Notice the date of that testimony? That testimony was given well after this case had been tried. Does it sound like these insurance companies are gonna own up to anything on their own, even after getting popped with that punitive damage award?

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