MEDIATING DISPUTEDHEALTH INSURANCECLAIMSICA Annual Education Conference – October 4,2010
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS2 Mariam Zadeh Nancy T. Poblenz, RN, BSN, DDS, JD, Mediator CPHRM First Mediation Corporation Director Litigation and Loss Prevention 16501 Ventura Boulevard, Suite 606 CHRISTUS Health - Risk Management Encino, CA 91436 Direct Dial 281.936.3673 Tel: 818.784.4544 Fax: 818.784.1836 Mobile 281.788.5441 Email: mzadeh@firstmediation Email: email@example.com Robert R. Pohls Forrest Latta Pohls & Associates Burr & Forman LLP 10940 Wilshire Boulevard, Suite 41 West I-65 / Service Road N. 1600 Colonial Bank Centre, Suite 400 Los Angeles, California 90024 Mobile, Alabama 36608 Tel: 310.694.3092 Fax: Tel: 251.345-8212 Fax: 251.345.9696 310.694.3093 E-mail: firstname.lastname@example.org Email: email@example.com
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS3 Preparing for Litigation – In-House Perspective Step 1: Document Retention and Litigation Hold Notice Step 2: Evaluate the Claim File Step 3: Evaluate the Writing Agent Step 4: Coordinate with Outside Counsel STOP, LOOK and LISTEN! Early Case Assessment Jurisdiction/Forum-Selection Evaluate Plaintiff’s Counsel Establish a Case Budget
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS4 Preparing for Litigation – Outside Counsel Perspective Step 1: Collect Information Step 2: Evaluate Claim Handling Step 3: Develop a Litigation Strategy Step 4: Identify the Client’s True Objectives Are there case-specific goals? What settlement terms are essential? Are there other business considerations?
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS5 Preparing for Mediation – Practice Tips Understand the Expectation Gap Adjust the parties’ needs and expectations Adjust the plaintiff attorney’s needs and expectations Remember the 3 most important jury motivators: Fear: Evidence of pattern or practice Anger: Arrogance, mistakes or incompetence Love: A worthy plaintiff who has been imperiled If all 3 are present, plaintiff will win BIG. If any 1 is missing, plaintiff may win small.
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS6 Preparing for Mediation – A Mediator’s Perspective Know When to Stop Trying the Case at the Mediation Identify and Remove the Non-Monetary Road Blocks When Needed, Ask to Talk to Plaintiffs Counsel Directly “Make Nice” with the Folks Next Door When All Else Fails … Find Ways to Keep the Dialogue Open
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS7 Preparing for Mediation – A Mediator’s Perspective Prepare Early by exchanging benefit and damage calculations Every Plaintiff has a Story … Let them tell it The Mediator is an Ally … Collaborate Together in Caucus Timing is Everything … Be Strategic About the Pace of the Process Read In Between the Lines
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS8 Background Facts – Communications with Agent • Surviving Insured owns and operates a restaurant in San Francisco • Surviving Insured and Deceased Insured applied for coverage with Insurance Company on April 6, 2007 • Surviving Insured told Agent she was planning to marry in a few weeks and wanted health insurance in place for her and her fiancé before their honeymoon • Agent suggested coverage through an association group policy offered to members of the local Chamber of Commerce
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS9 Background Facts – Application • Agent reviewed and completed a short form application with Surviving Insured • In the application, Surviving Insured denied any symptoms of (or treatment for) any health conditions • Surviving Insured signed the application in Agent’s presence, immediately below pre-printed text which stated that each statement in the application was “true and correct to the best of [her] knowledge and belief” • Insurance Company issued the policy standard without riders or rate ups, effective April 15, 2009
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS10 Background Facts – The Deceased Insured’s Injury • Surviving insured and Deceased Insured were married on June 1, 2009 • After their wedding, Surviving Insured and Deceased Insured held a private reception at Surviving Insured’s restaurant • Around 6 p.m., Deceased Insured lost control of his motorcycle, drove off the road and sustained serious head injuries • Deceased Insured was airlifted from the scene of the accident to Hospital
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS11 Background Facts – Claim for Deceased Insured’s Medical Care • Deceased Insured died 2 days after admission to Hospital as a result of the head trauma he suffered in the accident • Deceased Insured had received $35,000 in hospital care and services • In June 2009, Hospital submitted Deceased Insured’s bills to Insurance Company • Intoxication exclusion provides: “No benefits are payable for losses which result, directly or indirectly, from the insured’s intoxication.”
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS12 Background Facts – Surviving Insured’s Depression • Surviving Insured suffered severe depression in the months after Deceased Insured’s death • In October 2009, Surviving Insured was lethargic, contracted a fever and went to a local acute care facility • When Surviving Insured’s renal function continued to worsen, she was transferred to Hospital • At admission, Hospital contacted Insurance Company to verify that Surviving Insured had coverage • Insurance Company verified coverage, but refused to guarantee payment
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS13 Background Facts – Evidence of Pre-Existing Condition • Surviving Insured was discharged from Hospital on October 6, 2009 • Discharge Summary: “Never take acetaminophen- containing products again since her current and past hospitalizations both were likely due to chronic acetaminophen toxicity.” • On March 28, 2010, Hospital faxed Surviving Insured’s bills to Insurance Company for payment • Insurance Company begins claim investigation by requesting medical records from Surviving Insured’s internist and other providers
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS14 Background Facts – Claim for Surviving Insured’s Depression • Insurance Company denied Surviving Insured’s claim due to lack of information about a possible pre-existing condition • Denial letter also mentioned Hospital’s failure to provide written notice of claim within the 90-day period required by the policy • Surviving Insured, Estate of Deceased Insured and Hospital filed their complaint 3 weeks after receiving Insurance Company’s denial letter
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS15 Background Facts – Claims Against the Insurer By Surviving Insured (and Deceased Insured’s Estate) • Breach of Contract • Breach of Implied Covenant of Good Faith and Fair Dealing By Hospital • Negligent Verification (Hospital) • Fraud • Unfair Competition
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS16 Surviving Insured’s Claim for Breach of Contract • Exclusion: “Expenses that result from care or treatment of a Pre-Existing Condition will not be covered as Covered Charges.” • Pre-Existing Condition: “a Sickness or Injury for which a person has during the 6 months just prior to his enrollment date under this plan: a) received medical care, advice, or treatment; or b) had drugs or medicines prescribed whether taken or not; or c) had diagnostic tests ordered whether performed or not.”
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS17 Surviving Insured’s Claim for Breach of Contract • Insurer’s Position: • Surviving Insured’s claims were incurred for Vicodin and acetaminophen abuse • Surviving Insured had pre-application history of “Vicodin and acetaminophen abuse” • Surviving Insured’s Claims were properly denied on the basis of the Insurance Certificate’s pre-existing condition exclusion • Surviving Insured’s Position: • No evidence of pre-existing condition • Post-Claim Underwriting
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS18 Post-Claim Underwriting – Plaintiffs’ Perspective If the insurer has a right to investigate the applicant’s eligibility, it should not be allowed to ignore important information until a claim arises. By then, the applicant will have relied on the issuance of a policy by not seeking insurance from another source. If the insurer is allowed to rescind the policy based on information discovered after the claim arises, the applicant may have no opportunity to obtain any coverage for the loss.
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS19 Post-Claim Underwriting – Insurer’s Perspective • Contacting all applicants to thoroughly review application responses is time consuming • Contacting Healthcare providers is expensive and time consuming • Must distinguish post-claim underwriting from post- claim investigation • Every applicant has a duty to disclose material facts • Surviving Insured gave no information in application • No opportunity to investigate undisclosed health history
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS20 Possible Rescission Claim • On application, Surviving Insured represented that she had not taken any prescription drugs during the prior 5 years • Surviving Insured also represented that in the prior 5 years, her medical care had been limited to annual consultations with her OB/GYN – all of which were “Normal” • Surviving Insured signed application which stated that the representations and statements made in the application were “true and complete to the best of [her] knowledge and belief”
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS21 Possible Rescission Claim • Surviving Insured had an undisclosed health history of Vicodin and Soma use and low-back pain and fibromyalgia • Surviving Insured’s undisclosed pre-application medical history was material to the Insurance Company’s risk assumed: Insurance Company would not have issued coverage for Surviving Insured if this history had been disclosed on the application
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS22 Possible Rescission Claim “If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time the representation becomes false.” Cal. Ins. Code §359 Whether the representation was intentionally or unintentionally false does not alter the injured partys right to rescind the policy. Telford v. New York Life Ins. Co., 9 Cal.2d 103, 105 (1937); Contra, Union Bankers Ins. Co. v. Shelton, 889 S.W.2d 278, 282 (Tex. 1994) [In Texas, an “intent to deceive must be proved . . . to cancel a health insurance policy within two years of the date of its issuance when the cancellation is based on the insured’s misrepresentation in the application.”].
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS23 Possible Rescission Claim Insured has a duty to read the contract and the application in accordance with her representations and to report to the company any misrepresentations or omissions.” Telford v. New York Life Ins. Co., 9 Cal.2d 103, 107 (1937); See also, Lunardi v. Great-West Life Assurance Co., 37 Cal.App.4th 807, 826 (1995). Insurers therefore have an “unquestioned right” to rely on the person who would be insured “for such information as it desires as a basis for its determination to the end that a wise discrimination may be exercised in selecting its risks.” Robinson v. Occidental Life Ins. Co., 131 Cal.App.2d 581, 586 (1955).
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS24 Possible Rescission Claim Hailey v. California Physicians’ Service, Case No. G035579 (Cal. App. 2007) Cal. Health & Safety Code Section 1389.3 prohibits “post-claim underwriting” – a practice involving a plan’s failure to “complete medical underwriting and resolve all reasonable questions arising from written information submitted on or with an application.” Cal. Health & Safety Code Section 1389.3 gives a health care service plan the duty “to make reasonable efforts to ensure it has all the necessary information to accurately assess the risk before issuing the contract.”
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS25 Bad Faith Claim • A mere refusal to pay benefits due under a policy is not, by itself, bad faith. See, California Shoppers, Inc. v. Royal Globe Ins. Co. 175 Cal.App.3d 1, 15, 54 (1985) • An insurer’s actions constitute a breach of the implied covenant only if: benefits are due under the policy and the insurer withheld the benefit unreasonably and without proper cause California Shoppers, supra, 175 Cal.App.3d at 15, 54; See also, Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566, 573-575 (1973).
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS26 Bad Faith Claim If reasonable or based on a legitimate dispute, a mistaken or erroneous withholding of benefits does not expose the insurer to bad faith liability. Tomaselli v. Transamerica Ins. Co., 25 Cal.App.4th 1269, 1280-81 (1984) Opsal v. United Services Auto. Ass’n, 2 Cal.App.4th 1197, 1205-06 (1991) Lunsford v. American Guar. & Liab. Ins. Co., 18 F.3d 653, 656 (9th Cir. 1994) A delay in payment does not breach the implied covenant if insurer was investigating a genuine issue. Fraley v. Allstate Insurance Co., 81 Cal.App.4th 1282 (2000) Estate of Grant v. State Farm Life Ins. Co., No. 05-CV-02389
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS27 Hospital’s Claim for Fraud/Negligent Verification • A medical provider has standing to sue for damages when relying on an insurance company’s verification of health insurance benefits. See, Herman Hospital v. National Standard Ins. Co., 776 S.W.2d 249, 253 (Tex. App. – Houston [1st Dist.] 1989, no writ); Memorial Hospital v. Northbrook Life Ins. Co., 904 F.2d 236, 246 (5th Cir. 1990). • A Party cannot justifiably rely on pre-contractual representations that are directly contrary to the parties’ written, integrated agreement. Hadland v. NN Investors life Ins. Co., 24 Cal App.4th 1578 (1994); Hackethal v. National Casualty Company, 189 Cal.App.3d1102 (1987).
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS28 Hospital’s Unfair Competition Claim California Business & Prof. Code §17200, et seq. • enacted to protect consumers and competitors by promoting fair competition in commercial markets for goods and services [See, Kasky v. Nike, Inc., 27 Cal.4th 939, 949 (2002)] • generally prohibits any “unlawful, unfair or fraudulent business act or practice” [Cal. Bus. & Prof. Code §17200] • virtually anything that can properly be called a business practice and, at the same time, is forbidden by law can serve as a predicate for an action under the UCL [Smith v. State Farm Mut. Auto. Ins. Co., 93
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS29 Hospital’s Unfair Competition Claim Original standing requirements • “Actions for any relief pursuant to this chapter shall be prosecuted exclusively . . . by the Attorney General or any district attorney or by any county counsel . . . or any city attorney or by any person acting for the interests of itself, its members or the general public.” [Former Cal. Bus. & Prof. Code §17204] • A private plaintiff who suffered no injury could sue to obtain relief for others [See, Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal.4th 553, 561 (1998)]
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS30 Hospital’s Unfair Competition Claim Proposition 64 • Only plaintiffs who have suffered an injury in fact and have lost money or property as a result of unfair competition may prosecute claims under the UCL [Cal. Bus. & Prof. Code §17204] • Private parties may bring representative action only if comply with class action certification requirements [Cal. Bus. & Prof. Code §17203] • Applies to all cases pending on (or filed after) November 2, 2004 Californians for Disability Rights v. Mervyn’s LLC, Case S31798 (Cal. 2006) Starr-Gordon v. MassMutual Life Ins. Co., Case No. C03-
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS31 Estate’s Claims for Breach of Contract/Bad Faith • Toxicology report revealed that Deceased Insured’s blood alcohol content at the time of the accident was 0.15 – nearly twice the legal limit • Intoxication exclusion provides: “No benefits are payable for losses which result, directly or indirectly, from the insured’s intoxication.” • Insurance Company denied claims based on the intoxication exclusion • Intoxication Exclusion did not require proof that Deceased Insured’s intoxication was the sole proximate cause of the accident, but only a proximate cause of the accident Ober v. CUNA Mutual Society, 645 So.2d 231 (La. Ct.
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS32 Possible Claims Against Agent • Fraud • Negligent Misrepresentation • Negligence • Insurance agent acting within the course and scope of his or he employment with a disclosed principal insurer cannot be personally liable to the insured • Lippert v. Bailey, 241 Cal.App.376,382 (1966) Surviving Insured and Deceased Insured had duty to read insurance certificate upon receipt – Hadland and Hackethal
MEDIATING DISPUTED HEALTH INSURANCE CLAIMS33 QUESTIONS? Mariam Zadeh Nancy T. Poblenz, RN, BSN, DDS, JD, Mediator CPHRM First Mediation Corporation Director Litigation and Loss Prevention 16501 Ventura Boulevard, Suite 606 CHRISTUS Health - Risk Management Encino, CA 91436 Direct Dial 281.936.3673 Tel: 818.784.4544 Fax: 818.784.1836 Mobile 281.788.5441 Email: mzadeh@firstmediation Email: firstname.lastname@example.org Robert R. Pohls Forrest Latta Pohls & Associates Burr & Forman LLP 10940 Wilshire Boulevard, Suite 41 West I-65 / Service Road N. 1600 Colonial Bank Centre, Suite 400 Los Angeles, California 90024 Mobile, Alabama 36608 Tel: 310.694.3092 Fax: Tel: 251.345-8212 Fax: 251.345.9696 310.694.3093 E-mail: email@example.com Email: firstname.lastname@example.org