Monthly Archives: August 2011

Regence fined $100K for denying coverage for removal of birth control

Today, Washington’s Insurance Commissioner, Mike Kreidler, announced a $100,000 fine levied against Regence for its failure to pay for procedures to remove IUDs. Regence paid for the insertion of the device, as long as it was prescribed by a doctor. However, the problem arose when women wanted the devices removed — in that case Regence refused to pay for the procedure unless it was “medically necessary.” So if a woman decided she was ready to have kids and wanted the device taken out, Regence refused to cover the procedure unless she could prove that procedure was medically necessary to her health. In other words, really easy to get the implantation of the device covered, really hard to get the removal of the device covered.

So women were forced to either pay for the procedure themselves out-of-pocket, or forgo having it removed if they couldn’t afford the procedure.

Kind of outrageous.

Regence ended up denying 984 claims to remove IUDs between 2002 and today. And it wasn’t until one woman called the Office of the Insurance Commissioner in April 2010, that the OIC began an investigation resulting in the fine. Regence has now reprocessed all the claims and paid them, totaling about $149,000. Regence also must pay 8% interest to all policyholders whose claims were denied.

The Insurance Commissioner’s Order details how Regence violated the law. WAC 284-43-822 regulates the unfair practices relating to health care.

Section (1) prohibits any health carrier from restricting, excluding, or reducing “coverage or benefits under any health plan on the basis of sex.”

Section (2)(a) requires all carriers who provide comprehensive prescription coverage to not “exclude prescription contraceptives or cover prescription contraceptives on a less favorable basis than other covered prescription drugs and prescription devices.”

And finally, Section (2)(b) prohibits carriers from placing limitations or restrictions on “prescription contraceptives that are not required or imposed on other covered prescription drugs and prescription devices.”

By making it much harder to get coverage for the removal of IUDs, Regence violated all three provisions, and they are paying the price. Kudos to Mike Kreidler and the rest of his team at OIC for sticking up for the rights of women in this state.

The sad part is that most women who had coverage denied didn’t do anything about it. Only 3 of 984 women even bothered to appeal the denial of coverage. And it wasn’t until April 2010 — 8 years after Regence began denying coverage — that one of the women called of the Insurance Commissioner’s Office to complain.

I think the lesson here is that just because your insurance company denies your claim doesn’t mean that the denial was right under the policy or under the law. So if you feel that coverage has been unfairly denied, stick up for your rights — appeal the denial and file a complaint with the Insurance Commissioner.

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How much does it cost to take your case all the way to the US Supreme Court?

If you’re the video game industry successfully suing the state of California to challenge the constitutionality of its law prohibiting minors from buying violent video games, the answer is about $1.15 million. According to Bloomberg BusinessWeek, the attorneys at Jenner & Block, who represented the video game industry in Brown v. Entertainment Merchant’s Ass’n, asked the high court recently to order the state of California to pay those legal fees.

Among the goodies in this cost bill was $18,760 for the lawyers to work on the first practice argument, $21,928.75 for the second practice argument, and $12,698.75 for the third practice argument.The lead partner on the case billed a cool $250,000 for his time alone.

Oh, and also $2,725 for a junior partner to attend the oral argument and have lunch with the client afterward.

Ouch for the state of California and its taxpayers. It sounds to me like at this point this is simply a request by the winning party, and I’m assuming the state’s lawyers will be vigorously objecting to some of these items.

I’m equal parts appalled and in awe. I have enough trouble feeling bad about the hourly rate I charge for my time on the few hourly cases I have — I can’t even imagine what I’d feel like if I was billing out at the partner’s hourly rate, which has to be at least $600 per hour. Who’s worth that?

 

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Does wishing a judge happy birthday on Facebook count as ex parte conduct?

Social media presents all sorts of cool, interesting, interactive marketing opportunities. For lawyers and judges, though, it also presents all sorts of pitfalls because of the constraints of the ethical rules governing their conduct. The policy underlying these rules is that lawyers and judges have a special responsibility to ensure the independence and integrity of the justice system. If people lose confidence in our system and the rule of law, then people will stop following laws, and we slowly slip toward anarchy and every person for themselves.

In Washington state, lawyers are regulated by the Rules of Professional Conduct (RPC) and judges are regulated by the Code of Judicial Conduct (CJC). Both the RPC’s and the CJC’s prohibit lawyers and judges from engaging in ex parte contact. A lawyer for one party cannot communicate with the judge outside the presence of the lawyers for the other parties on a matter related to the lawsuit at issue. The rule is designed to keep all parties on the same footing and to protect from the appearance that the judge favors one party over the other.

These rules create all kinds of problems for lawyers and judges in social media land. For example, can lawyers and judges be Facebook friends? On one hand, judges are people and allowed to maintain real life friendships with lawyers. On the other hand, it might look a little improper when a judge is publicly Facebook friends with some lawyers and not others. Some states, like Florida, have addressed this problem simply by prohibiting judges and lawyers from being Facebook friends. But what does it mean to be a Facebook friend in this day and age when people have, literally, hundreds of Facebook friends? And what happens when a judge happens to be Facebook friends with, not one of the lawyers for a party, but one of the major witnesses?

This latter question was addressed just a few days ago by the Supreme Court of South Dakota. In Onnen v. Sioux Falls Independent School District, the plaintiff was terminated from his job as a registrar. Onnen appealed through the administrative level and after those appeals were denied, he filed suit arguing he was wrongfully terminated (the reasons why are not important here). The judge held a three day hearing, after which he affirmed the decision to terminate. Onnen discovered after the decision that one of the major witnesses for the school district was Facebook friends with the judge and had wished the judge a happy birthday on his Facebook page while the case was pending. Onnen asked for a new hearing based on this ex parte contact between the witness for the school district and the judge. That request was denied.

The South Dakota Supreme Court affirmed the decision to terminate and the denial of a new hearing. The court held that by definition, the happy birthday post was not about a matter related to the court action. In other words, communication is prohibited only where it concerns something that is in front of the judge or about to be in front of the judge.

The Court went on to hold that even if the happy birthday post was considered ex parte communication, there still would not be a need for a new hearing because the character of the communication was harmless. A new hearing is warranted only where “the adverse party is prejudiced by an inability to rebut the facts communicated and if improper influence appears with reasonable certainty.” Because there was no information communicated to the judge and the judge stated he did not personally know the witness nor did he connect the post to the witness, there was no improper influence and no need for a new trial.

I think this decision was the only correct one. Think about how many times a happy birthday message gets posted on Facebook. As Seattle lawyer Venkat Balasubramani said:

If any modern day communication is more inconsequential than a “happy birthday” post on Facebook, I’m not sure what it is. We’ve all seen, at one time or another, Facebook’s reminder that it’s our acquaintance or friend’s birthday and have taken the two seconds out of our busy web-surfing schedule to wish the person happy birthday. Both the sender and recipient know full well that this is about the most impersonal birthday gesture possible in modern day society.

If this decision had gone the other way, the implications would be staggering. Any time a judge stopped to chat with a lawyer — even just to say “Hi, how are you?” — she would be in danger of having any decisions involving that lawyer reversed. Our already overburdened court systems might collapse from the sheer number of complaints about this kind of communication. Judges would then have to isolate themselves even more than they already do, which would lead to an even-more-removed judiciary.

Thankfully, the South Dakota Supreme Court recognized the happy birthday post for what it was — nothing more than an impersonal, meaningless gesture.

(h/t to Venkat Balasubramani over at Eric Goldman’s Technology & Marketing Blog, linked above. In the interests of full disclosure, Eric Goldman was my Contracts professor in law school.)

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What is covered by your homeowner’s insurance?

Insurance is important to have, whether it’s auto insurance, homeowner’s insurance, commercial or professional insurance. We all know this. Sometimes bad things happen and it’s nice to know you’re covered just in case. But how many of you have actually read your insurance policies cover to cover and know what’s actually covered and what isn’t? The Office of the Insurance Commissioner for our fair state maintains a very helpful website with a blog and recently posted about 10 things your homeowner’s insurance typically doesn’t cover.

For example, these problems are generally not covered:

    • Slow leaks
    • Flooding
    • Foundation settling and cracking
    • Mold, mildew or dry rot
    • A home business
    • A second residence on the property

You should read the post for yourself. And for heaven’s sake, go read your insurance policy!! If something is not covered, you may be able to purchase separate insurance for it, like earthquake or flood damage. And consult with a lawyer if your insurance company is refusing to pay for something you think is covered.

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Links and blogs

To the right, I’m compiling a list of links to local, useful legal-related organizations and blogs. I would love suggestions of links and blogs to include. Any ideas?

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Lawyers are people, too!

Every month, the Washington State Bar Association puts out a magazine with lots of information for legal practitioners. One of the features is a profile of one lawyer, in what I’ve dubbed the “Lawyers Are People, Too” section. (It’s really called Briefly About Me, but I think my title is much more accurate.) It gives the opportunity to get to know one member of the bar through a Q&A. This month, it’s my friend Justin Walsh. See, not all lawyers are dry and boring — Justin is in to music!

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Who pays the legal bills when a court finds an insurance company has no duty to defend?

When you purchase insurance, like homeowner’s insurance or auto insurance, one of the things you’re buying is access to a lawyer paid for by your insurance company to defend you if you ever screw up and hurt someone else. This benefit is frequently referred to as the insurance company’s “duty to defend.” Sometimes, however, insurance companies try to wriggle out of this duty by trying to find reasons why you are not covered for what happened.

When faced with a lawsuit against its policyholders, insurance companies have three options:

  1. Hire a lawyer and pay the lawyer to represent the policyholder until the claim is resolved;
  2. Refuse to provide a lawyer and tell the policyholder it has no duty to defend and won’t cover the loss; or
  3. In close calls where it isn’t clear there’s no coverage, provide a lawyer under what’s called a “reservation of rights,” which puts the policyholder on notice that the insurance company thinks there might not be coverage and why. The insurance company then starts a separate proceeding to ask the court for a ruling there is no duty to defend.

Obviously, the first option is best, and there’s no problem if the insurance company does this. The second option is a dangerous one for insurance companies because it carries heavy penalties — if the insurance company is wrong and a court finds it did have a duty to defend, the insurance company is on the hook for all the harm the denial of coverage caused, including attorney fees, business losses, emotional distress at having been abandoned by your insurance company, etc. These damages are often significant because of the ripple effect caused by being abandoned by your insurance company (paying for your own lawyer, which affects personal and business finances, which can lead to people losing homes or businesses, which can lead to psychological or physical health problems, which can lead to more money problems, etc.).

Because option two is such a bad option, Washington courts have encouraged insurance companies that have questions about coverage to use the third option. This gives the policyholder a lawyer in the underlying injury action, while at the same time providing the insurance company with a venue to argue why it shouldn’t have the duty to defend the policyholder and protection from a later bad faith suit arguing the insurance company mishandled the claim (though the policyholder has to hire a lawyer at his/her own expense to argue why the insurance company is obligated to provide coverage). If insurance companies provide a lawyer in the underlying lawsuit while a court is deciding whether there is coverage, then everyone’s interests are (in theory) protected.

But the question occasionally arises, who pays the policyholder’s lawyer up to the point when the court finds no duty to defend? Division I of the Washington Court of Appeals answered that question last week in National Surety v. Immunex. There, the court held that National Surety was still on the hook for the fees of the lawyers who represented its policyholder, Immunex Corporation, up to the point the court found there was no duty to defend. National Surety did not have to pay fees beyond that finding. The court reasoned that by providing a defense under a reservation of rights, National Surety incurred a very important benefit, namely, protection from a later lawsuit alleging it mishandled the claim. As such, paying for the lawyer for the policyholder was a proper price for this benefit. The court further noted that there was no provision in the insurance policy giving the insurance company the right to recoup those attorneys fees from the policyholder, and National Surety’s attempts to add a right to recoupment into the reservation of rights letter was improper.

While this case gives important protection to insureds, the implication is that insurance companies can write a right to recoup such defense costs into the policy. Such an addition would be problematic and harm the insured in a couple of ways. First, as discussed above, it ignores the benefit insurance companies incur when they defend under a reservation of rights and would in essence force the policyholders to pay for something that benefits the insurance company. Second, it would force policyholders to pay for legal fees incurred at the direction of the insurance company but were usually never ok’d by the insured. Most of these types of insurance policies give the right to control the defense of the lawsuit to the insurance companies, meaning the policyholder has no say in what happens and what the lawyers do. In other words, the insurance company tells the lawyer what to do up until the court says it has no duty to defend, and then the policyholder has to pay for everything the lawyers did, even if he/she disagrees with the tactics taken by the lawyers as directed by the insurance company.

Hopefully the courts will have a chance to rule on whether recoupment provisions in insurance policies are appropriate.

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