March 9th, 2012

Cuomo Attacks (Part of) No-Fault Fraud — An open letter to the Governor

Dear Gov. Cuomo:

First, let me tip my hat to you in going after No-Fault fraud, as you announced yesterday. Your decision to shut down medical mills and strip the licenses of deceptive doctors that churn phony No-Fault claims is admirable. I know this follows on the dozens of arrests made last week by Preet Bharara, the United States attorney in Manhattan for this type of conduct, coming from largely Russian-born individuals living in Brighton Beach.

But — and you knew there was a “but” coming, didn’t you? — I think you have only addressed half the problem. And with No-Fault fraud now on your plate, I think I speak for many when I ask that you authorize a more comprehensive investigation.

For the problem of No-Fault fraud stems not only from doctors doing phony billing, but comes also from sham medical exams by insurance companies to deny benefits.

You see, in order to get No-Fault benefits, an injured person must be examined by a so-called “independent” doctor that is hired by the insurance company responsible for paying, and treatment authorized. But there are way too many accident victims who are denied those benefits after quickie 5-minute exams. In order to appreciate why that would happen, one only needs to understand a fundamental conflict of interest: The more denials a doctor issues, the more sought-after s/he is by the insurance companies for future exams. If you are the insurance company and knew Dr. Smith denied coverage 30% of the time and Dr. Jones denied it 90% of the time, wouldn’t you want to keep sending claimants to the one that saves you money?

New Yorkers surrendered certain rights with the birth of the No-Fault laws. We can no longer bring actions unless we have suffered a “serious injury.” In exchange, we are supposed to get guaranteed medical/economic benefits up to $50,000 in exchange for the premiums that we pay.

But what happens with this kind of insurance fraud? The insurance company benefits because many lawsuits can’t be brought and then a second time by stopping the benefits the claimants were supposed to receive.

Investigation of this fraud should be relatively simple, as you know from being our former Attorney General. If a doctor is seeing 10 patients in an hour for No-Fault exams, and churning out cookie-cutter denials, you can bet your last dollar that doctor isn’t doing it with the best interests of the patients in mind.

So I applaud your efforts to go after No-Fault fraud from those doctors running medical mills and over-billing. And if there are some attorneys in cahoots with the medical providers, go get them too.

But please don’t leave the legitimate auto accident victims, with legitimate injuries, out in the cold because of fraud being perpetrated from the insurance company end of things.

Respectfully submitted,

Eric Turkewitz

December 1st, 2011

New York’s Worst Auto Insurance Companies

Governo Andrew Cuomo released today, via the New York State Insurance Department, a list of the worst auto insurance companies in the state. Actually, the list also has the best, as it lists all 179 insurers.

The list is based on complaints to the Insurance Department that were upheld, divided by the dollar amount of premiums written. Thus, large insurers are not penalized for having more complaints, which one would expect since they write more policies. There is a problem on the other end, of course, in that for an insurer writing very few policies, just having one or two upheld complaints may make a huge statistical difference.

Nevertheless, since the fundamental business of insurance is to collect as much in premiums as possible and pay out as little as possible, the area is ripe for oversight and consumer awareness. This is especially true given the enormous sums of money that companies like Allstate, State Farm, GEICO and others pump into their advertising budgets to persuade consumers.

So, if you are in the market for new insurance, this is some of the hard data to look at instead of cute geckos or cavemen, as expressed by complaints from those who came before you to buy from that particular company.

If you have a complaint, by the way, don’t bother using the website on the report. They blew it on that one. The Insurance Department was recently combined with the Banking Department into the brand hew Department of Financial Services, and you can file a complaint at this site. (Someone apparently used a template for the report and forgot to update it.)

And with your complaint, those people seeking insurance in coming years may be able to learn from the problems that you experienced.

Consider this my public service bit for the day. You are welcome.

October 19th, 2011

Insurer Slammed For Bad Faith as Judge Cites “A Few Good Men”

Can you handle the truth? Just to make sure, Brooklyn Supreme Court Justice Arthur Schack opened his opinion yesterday — wherein he castigates a New York insurer for bad faith in settlement negotiations — by citing to the famous courtroom showdown in A Few Good Men in Taveras v. American Transit Ins. Co.

Col. Jessup: You want answers?
Lt. Kaffee: I think I’m entitled to them.
Col. Jessup: You want answers?
Lt. Kaffee: I want the truth!
Col. Jessup: You can’t handle the truth!

And the truth, as seen through the eyes of Justice Schack, is that American Transit, which insures many of New York’s taxis, is now on the hook for $2,250,000 after refusing to settle for the $200,000 limits of the insurance policy. That is 2.25M plus interest from 2006, at 9% per annum, which should add about another million. According to Justice Schack, American Transit, “refuses not only to acknowledge, but to handle the truth!”

American Transit refers to itself this way on its website:

The Company has established itself as the leader and principal market for this type of business and its resultant premium volume has established the Company as the leading commercial automobile underwriter in New York State for the past several years.

So let’s see what this insurance carrier did to deserve their comeuppance from Justice Schack:

It all started with a car accident in which Taveras was a back-seat passenger in Amir’s taxi, insured by American Transit. Amir rear-end another car, and was then rear-ended itself. All three drivers were sued by Taveras, who suffered serious injuries to his neck, back and knee, requiring surgeries to his back and knee.

With multiple cars involved, a liability trial followed, and the jury found the American Transit taxi 70% liable with 30% liability on the car that plowed into them (the second hit). That other liable car, the one with the 30% liability, also happened to be insured by American Transit. Each taxi had $100,000 in coverage.

With liability established, and such significant injuries, the combined $200,000 insurance policy would have been clearly inadequate. The claims included, in addition to the pain and suffering, future medical needs of $636,000 and lost earnings of about $924,000

But the plaintiff recognized, as so many plaintiffs do, that going after personal assets beyond the insurance policy was likely to be a losing proposition, as you can’t get blood from a stone. Or a taxi driver.

So the plaintiff said, both before the liability trial and again afterwards, that he would take the 200K policy and be done with it. American Transit responded to the demand at one point, according to plaintiff’s counsel, by saying it would pay the 200K “over our dead bodies.”

Not only did they refuse to negotiate in good faith, but they also failed to tell their insured that his personal assets would be put at risk when American Transit refused to settle for the policy. Oops.

Perhaps AT figured that, with a badly injured plaintiff, they could simply wait him out and settle for even less, regardless of whether this constituted good faith negotiations or no?. Perhaps they figured they had the upper hand, as many insurers do? Perhaps, they were simply arrogant? Perhaps they were too busy going to insurance conference conferences to bother looking at the case?

Maybe they just wanted to make the plaintiff spend his money? Because after the plaintiffs’s experts testified — a neurosurgeon, an orthopedist, a neurologist and an economist — American Transit offered up the two policies. Plaintiff told the defendant to go shit in a hat (as we say in legalese) and went on to take a verdict.

After American Transit refuses offers to settle, a whopper of a verdict comes in for $9,263,376. This was then reduced to $2,500,000, as we don’t let verdicts stand that deviate materially from what would be reasonable compensation. (See: How New York Caps Personal Injury Damages.) Since the front car in the accident had settled for 250K, that left $2.25M

Amir, who was now on the hook for millions, assigned his rights to the plaintiff to proceed against his insurance company. And it ended this week with the court saying that:

“it is clear, as a matter of law, defendant AT engaged in a pattern of knowing and reckless disregard for the interests of its insured AMIR. Despite its protestations to the contrary, AT refuses to acknowledge its bad faith and now attempts to disclaim and throw AMIR “under the cab.”

As we say in legalese, ouch.

The standard for bad faith by an insurer in New York is:

in order to establish a prima facie case of bad faith, the plaintiff must establish that the insurer’s conduct constituted a “gross disregard” of the insured’s interests that is, a deliberate or reckless failure to place on equal footing the interests of its insured with its own interests when considering a settlement offer.

And this seemed to fit American Transit to a T.

The most striking part of the decision, however, is this: The issue was decided on summary judgment after a series of depositions of AT employees. That is, American Transit’s bad faith was so bad that the judge found it as a matter of law, as there was no factual issue for a jury to decide. Justice Schack did this while acknowledging the standard for such actions:

Courts, in bad faith actions, are hesitant to grant summary judgment against defendant insurers because typically there are issues of fact with respect to whether the conduct of the defendant insurer constituted “gross disregard” of the insured’s interests. However, courts are rarely presented, as in the instant action, with party admissions acknowledging that defendant AT’s conduct was “reckless,” demonstrating a pattern of behavior evincing a conscious or knowing indifference to its insured, AMIR. AT’s employees admitted to AT’s “reckless” conduct and one even deemed it “suicide” to go forward on damages, based upon the limited information maintained by AT and the lack of any colorable defense to plaintiff’s damages.

That is some pretty strong stuff.

The decision is long and detailed, and goes into the multiple failings of the American Transit to evaluate the case prior to trial and its attempts to shift blame to its attorney. But Justice Schack was not interested in blame-shifting to trial counsel when it was clear the powers-that-be, those with actual authority to settle the case, hadn’t even looked at it. Justice Schack wrote:

Before the liability portion of the trial began: Claims Supervisor Phyllis Toppin did not evaluate the merits of the case; Bodily Injury Manager Jay Ellenberg was not aware that the case existed; and, Vice President Richard Carroll only learned of the case one month before trial and never reviewed the file himself. This is surprising, because only Ms. Toppin, Mr. Ellenberg and Mr. Carroll had the authority to settle a case for more than $50,000. Also, Mr. Ellenberg and Mr. Carroll were the only AT personnel with the authority to set the reserve on a case at $100,000…

A couple other points worth noting: American Transit, after years of asserting they were the insurer, tried to disclaim after they lost. The judge tossed the claim as equitably estopped. He did not appear to be amused by such tactics.

Another tidbit, the defendant driver, Amir, has a law degree from Pakistan and a degree in the US and was permitted to sit for the bar at the time of the accident. After he got blind-sided by his insurer — having never been told he might be on the hook for any excess — they told him to file for bankruptcy and hold of sitting for the bar.

This decision sits as a textbook lesson of everything they should never do.

Elsewhere:

Insurer Acted in Bad Faith by Refusing to Settle Suit, Judge Says (NYLJ)

Insurer can’t ‘handle the truth’ in bad-faith case: judge (ThomsonReuters)

June 6th, 2011

When A Law Firm Gets Scammed, Must the Liability Insurer Defend and Indemnify?

This one is for all lawyers, not just the personal injury folks. Because we all get those scam emails asking us to do some work for the out-of-country “client” who just needs this tiny bit of work done to collect a big fee. And some folks get taken, despite what they see as their best efforts to make sure they don’t.

And this comes as a follow-up to a post a few months ago about a case from the Second Circuit, where a law firm was hustled by accepting a check and depositing it in its account. After the bank said the funds were available, it disbursed the funds and kept a portion for a legal fee. Then the bank called and said the original check was counterfeit, and by the way, “available” means something different to the bank than to everyone else. The law firm lost and, when the music stopped, didn’t have a chair to sit in.

Now comes a different twist on the same story out of a New York state appellate court, and the issue is whether the law firm’s malpractice liability carrier has to defend and indemnify the firm for getting suckered. These were the bare bones facts in Lombardi, Walsh v. American Guaranteee and Liability that came out of the Third Department a few days ago:

Plaintiff, a law firm, was contacted via e-mail by an individual purporting to be the chief executive officer of a Taiwanese corporation seeking legal assistance in collecting debts in North America. After the individual sent plaintiff a signed retainer agreement, plaintiff received a $384,700 check from a purported debtor of the corporation. Plaintiff opened an account at Berkshire Bank and deposited the check. At the request of the purported chief executive officer, plaintiff instructed Berkshire Bank to wire the value of the check, minus a legal fee for plaintiff, in two transfers to a third party in South Korea, who was allegedly a supplier of the Taiwanese corporation. After the funds were transferred, Berkshire Bank notified plaintiff that the check was counterfeit and plaintiff’s account was overdrawn.

The firm made a claim through its liability carrier and the carrier disclaimed. The firm settled with the bank and then brought action against its insurance company.

The lower court granted summary judgment to the insurance company under the theory that legal services were not being rendered.

Not so fast, said the appellate court. This did take place in the rendering of legal services, even if turned out to be fraudulent. The Court said that:

Regardless of whether the imposter qualified as a “client,” the policy does not require an actual “client”; the policy only requires that plaintiff “render Legal Services for others,” and the imposter fell within that broad category.

The carrier is on the hook both to defend the firm. Since the settlement was confidential, the case was sent back to the lower court for further proceedings.

But, this is the kicker, and the reason I follow up today from that post a few months back out of the Second Circuit. There is this comment in the footnotes that should stand as a warning to all lawyers about what the bank really means when it says the funds are available:

Plaintiff had instructed Berkshire Bank to wait until the check “cleared,” which it did, before wiring funds. Unfortunately, plaintiff did not understand that a bank may be required to make funds deposited by check available for the account holder to use even if the funds have not been finally collected by the bank (see 12 CFR 229.10 [c]). If the bank later determines that the check does not constitute good funds and cannot be finally collected, the bank may require repayment of those funds that had been made available to the account holder.

So when a bank says the funds are available, they might retract that statement in the future leaving the lawyer holding the bag. Unless, of course, you have insurance.

(hat tip, Jay Breakstone, The Nigerian Shuffle Strikes Again)

July 7th, 2010

I Could Make A Fortune…

Lawyering isn’t where the money is…Some of you, I suspect, may have seen a scheme like this elsewhere…

A guest blog from Jason Paris, a trial attorney here in New York:
—————————————————–
I came up with an idea, a good business idea, which might need some fine tuning, but here it is. I am going to start a new business.

This is the model. I take money from people telling them that I will pay them when something happens. I want a lot of money, and therefore I need to find something that people use a lot – I need a mass market. People drink soda, eat food, drive cars and get haircuts. I will have too much opposition from the food and drink industry to screw with them, someone has already taken the car racket.

So I am left with the haircut. Everyone gets a haircut. I am thinking that I should collect money from anyone who is ever going to have a haircut, i.e., everyone. In return I will promise if a barber or a hairstylist cuts the person’s ear, I will pay him, make him or her whole, pay the medical bills, provide salon-side assistance, put him or her at rest, send flowers, make him or her feel special, protected, in peace so that he or she could continue to live their wholesome life in his or her special way.

I am insuring against the risk of being cut in the ear during a haircut. Starting investment in my venture, ground level, is 25 million, in return for 5% of the profits. This is the best business opportunity of your life, you just do not know it yet.

Now how do I sell this idea, millions of people going through life with thousands of haircuts without having anyone cutting their ears? To sell my product, I have to scare the people. I hire a number of scientists and advertising people and they come up with numbers and statistics. They show the carnage that could be caused by having one’s ear cut during a haircut, the irreparable trauma from which one could never recover, the instances where children were killed, the sharp edges of scissors, the slow motion of a scissor cutting through the layers of skin in an ear.

I advertise. I tell them that they could trust me. They are in good hands. Like a good neighbor, I’ll always be there. When they have my insurance card in their wallet, they would sleep better. I am always there for them in the time of the tragedy.

But the business is still not picking up speed the way I want it to. What should I do? I should pass a law. It should be mandatory for anyone who is ever going to have a haircut to have insurance for it. I agree that I will provide minimum protection under the law. To make sure that people do not evade the law (that they do not avoid paying me), the law provides penalties. Those who do not have an insurance card for a haircut cannot have one. If a salon gives a haircut to a patron who does not have a haircut insurance card, it will lose its license, pay a penalty not to exceed $250,000 and/or imprisonment of 5 years.

Now, finally, money starts flowing in. So I decide that who the hell are the people to see what my promise is in writing before they buy my insurance. I am not showing it to them. Anyway they have no option other than to buy it if they want to have a haircut. So I will give them a copy of my promise only after they buy the insurance.

Am I wrong? Of course not. There are some claims, here and there. Some butcher turned a hairstylist cutting someone’s ear, so I have to pay. I am paying, but it annoys me; I hate it.

Suddenly, one year the claims are a few too many. This really pisses me off. I hear that some poor schmuck in Brooklyn who couldn’t pay his rent and was about to be evicted from his apartment with his kids, you know the low class immigrant types, told his cousin barber to cut his ear so he could get the insurance payout. This drove me crazy. It is like cutting flesh out of me. I have to deal with this.

These staged ear cuttings must stop. I am going to raise my insurance rates on EVERYONE. I will tell everyone that since I have to pay an illegitimate claim, everyone has to bear the burden. I was pissed off when I said it, and never thought people could buy it. But they did.

They thought my raising the rates was justified. So I kind of like this staged ear cutting phenomena. Because the longer it is there, the more ammunition I have in my favor. How do I ensure that it is there for a long term?

I will assign people in my company just to find it. Then I have to make sure that the attorney general has an “ear cutting” unit, the district attorney has an ear cutting unit, the United States Attorney has an ear cutting unit, and the Insurance Department has such a unit. We will have a hotline for anonymous calls for staged ear cuttings, so all those people who hate their neighbors or relatives will report such claims, even it is not true. To justify these units’ existence and their paychecks, they have to find something, right? Even if they have to stage a staged ear cutting, catch the poor bastard and prosecute him or her, who deserves it anyway.

I will award the efforts of the ear cutting units, by publicity, photo shoots, awards for their dedication to public service, for their zealous efforts on behalf of the people of this great state. They are the people who fight to eradicate the fraud and criminal elements engaged in ear cuttings from our society.

I want to make sure that the words “fraud,” “crime” and “staged” are always associated with this type of claim. When we take them down, we take down the people whose ears were cut, the hair salons, the barber shops, the medical facilities, and their attorneys – the whole conspiracy ring. We send the message!

I should not lose focus because I need these staged ear cuttings. Because while we are in the attack mode, the people are not going to look at me. I hate when people look at me. I have nothing in common with them. But there is something more that I do not like, it has been bothering me since the beginning-that I have to pay so much for this stupid injury.

Since it is now mandatory for everyone to pay me, I want to limit what I have to pay out. I will pay the poor schmucks’ EMS and ER and hospital treatment, but beyond that I will not pay, unless there is a serious ear cut. I looked at most of my claims and most fall into a simply cut with bandages. I do not want to pay for these claims anymore.

So we pass a law that I only pay for serious ear cuts, and we define it to mean only complete amputation of the ear, rupture of the ear drums (we make it plural so that only both ear drums ruptures fall into this category), disfigurement that you cannot cover (for most people it could always be covered with hair), permanent deafness (we leave it unclear so that in the future we will argue before a judge that it only applies to both ears, otherwise why did I (the legislature) say “permanent”, but I recognize that I might lose this battle.

Then we place the burden on the people whose ears have been cut to prove that the ear cut was serious. Let them prove it that it is serious. I have to be vigilant every step of the way, I have to always come up with more stuff for them to prove; I fight this battle in court. I really do not have to because I won this battle a long time ago, but it is just in my nature. I am a fighter, I fight against the adverse forces, the dark cloud, i.e., the injured people who are all out there to get my money.

We also make it difficult for the doctors and hospitals to collect. We, I, pass laws to make it so difficult for health care providers to get paid that no one will touch those whose ears have been cut. We put in the laws the words “fraud” and “staged” so those who doubt me have nothing more to doubt.

We forever stain those who in any way touch those whose ears have been cut. Let’s throw them a bone, give them something, I will ease the serious injury threshold a little bit, but not too much. I want to keep them in check. I love this country that let’s me get away with so much. We should cherish this opportunity to be free.

This investment opportunity is only open to a few like-minded leaders.