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U.S. Airways, Inc. v McCutchen, ____ U.S. ____ (4/16/13) holds that in an ERISA action under §502(a)(3) by the plan administrators to obtain “appropriate equitable relief . . . to enforce . . . the terms of the plan,” the plan’s terms govern and override any doctrines designed to prevent unjust enrichment. The plan paid $66,866 in medical expenses to McCutchen due to a car wreck. A settlement of $110,000 was reached and McCutchen received $66,000 after attorneys’ fees were deducted. The plan sued and demanded reimbursement of the entire $66,866 it had paid on McCutchen’s behalf. The Supreme Court held that the plan could obtain the funds its beneficiary had promised to turn over under the terms of the plan. However, the Court also held that while equitable rules would not trump a reimbursement provision in the ERISA plan, they may aid in properly construing it, and as to allocation of attorneys’ fees this particular plan was silent. This plan did not address cost of recovery, so the Court applied the common fund doctrine, which governs in the absence of a contrary agreement. The Court pointed out that without the common fund rule, the insurer would get a free ride on the beneficiary’s efforts, and the beneficiary, as in this case, could be made worse off by having procured a recovery from a third party. This decision leave the door open for appropriate allocation of attorneys’ fees and litigation costs when an ERISA plan seeks reimbursement from its beneficiary, but it does little to benefit the injured beneficiary.
For the complete opinion, click here.
A new Code Section, O.C.G.A. § 9-11-67.1, provides a minimum of 30 days for a defendant (or his liability insurance company) to respond to a settlement offer made before suit is filed, in case arising from the use of a motor vehicle. The new law allow the insurance adjuster “to seek clarification regarding terms, liens, subrogation claims, standing to release claims, medical bills, medical records, and other relevant facts,” without that being deemed a counteroffer. The demand should be sent by “certified mail or statutory overnight delivery, return receipt requested” and shall specifically reference the new Code section. This statute was meant to give insurance companies adequate but not unreasonable time to respond to a settlement demand without being subjected to a subsequent bad faith claim for failing to settle the case within policy limits.
Click here to review the complete text of the new law.
For years the Tennessee appellate courts have been notoriously biased in favor of insurance companies, particularly Tennessee Farmers Mutual. Finally, however, the Court of Appeals has let a jury take a big stick to their favorite son.
In Leverette v. Tennessee Farmers Mutual, 2013 Tenn. App. LEXIS 177 (March 4, 2013), a woman was severely injured in a wreck on 12/21/08 with an automobile driven by an unlicensed minor. The child’s parents’ were insured by Tennessee Farmers (TFM), and it denied coverage and refused to defend the suit on the basis of an exclusion in the insurance policy “for damages caused by a party driving without permission of the owner or a person “in lawful possession” of the vehicle.” No defense was offered, and the injured woman obtained a $1 million default judgment against the minor driver. The injured woman and the child’s parents then jointly filed suit against TFM for breach of contract, bad faith, violation of the Tennessee Consumer Protection Act (TCPA), and violation of the Unfair Claims Practices Act. The trial court ruled that, as a matter of law, the minor was entitled to insurance coverage under her parents’ policy at the time of the accident. The rest of the case was submitted to a jury, who found that TFM had violated T.C.A. § 47-18-104 (27) and awarded $1,000,000 in damages. The trial court trebled the compensatory damages and awarded attorney fees under TCPA. The jury also awarded compensatory and punitive damages on the “bad faith claim.”
The Court of Appeals did not sustain the verdict on the bad faith claim under the circumstances, as the plaintiff did not plead a violation of T.C.A. § 56-7-105, but rather relied on a common law tort of bad faith, which the Court said is not recognized in Tennessee in lawsuits between the insured and insurer.
As to TCPA, however, the jury was asked, “Do you find that the Defendant committed an unfair or deceptive act or practice under the Tennessee Consumer Protection Law that caused damage to Chad and Donna Sanders parents and guardians for Julia Claire Sanders, or Chad and Donna Sanders in their individual capacity?” The jury answered the question in the affirmative.
Although the Court of Appeals let TFM off the hook for treble damages under TCPA, the Court clearly held that TFM was subject to liability, given the finding by the jury that TFM had committed “an unfair or deceptive act or practice”:
“We affirm the verdict and judgment holding that TFM had committed unfair or deceptive act or practice under TCPA causing damages to Sanders. The trial court’s award of $1,000,000 in compensatory damages is affirmed.”
Unfortunately the Legislature, in 2011, moved in to protect the insurance industry and amended T.C.A. § 47-18-104 (27) to vest enforcement with the goverment in lieu of the citizens who have been wronged. The Code section now provides:
“Engaging in any other act or practice which is deceptive to the consumer or to any other person; provided, however, that enforcement of this subdivision (b)(27) is vested exclusively in the office of the attorney general and reporter and the director of the division.”
The following article is a disturbing glimpse into how Tennessee Workers’ Compensation is being reformed in our Legislature:
Open-Mic Gaffe: Powerful Chairman Vows to Ram Workers’ Comp Bill Through His Committee
Posted by Jeff Woods on Wed, Mar 6, 2013 at 1:47 PM
For embarrassing open-mic gaffes, it’s not exactly up there with Ronald Reagan joking about bombing Russia. But it’ll do until something worse comes along for state Rep. Jimmy Eldridge, the Republican chairman of the House Consumer and Human Resources Committee.
Eldridge was caught by the legislature’s streaming video equipment complaining to a couple of people who appear to be constituents about this letter to the editor in the Jackson Sun. The letter criticizes Gov. Bill Haslam’s workers’ compensation bill, which rigs the system for employers. After making a few disparaging remarks about the letter writer, Eldridge promises to ram the bill through his committee.
“I’m going to take care of that bill,” he says. “That freight train is going off …”
So much for fair hearings and the deliberative legislative process.
Eldridge also says the bill’s critics are only “trying to rouse employees …”
“Uneducated people,” the unidentified woman in the video interjects.
“… and scare them to death,” Eldridge continues.
“I can assure you of this,” he adds, “that bill is flying …” Then he stops himself and looks at the microphone.
“Let’s make sure that thing’s not on,” he says, a little late. “You gotta be careful. Let’s get away from it.”
We tried to ask Eldridge about his remarks, but he wouldn’t agree to talk to us. Mary Mancini of the pro-labor Tennessee Citizen Action watched the video and gave this reaction:
“This is a complicated issue that is going to affect tens of thousands of Tennesseans when they are at their most vulnerable. It shouldn’t be ‘freight-trained’ through any committee. It should be given the careful and thoughtful review that an issue if this magnitude deserves.”
This morning, the bill cleared the House Consumer and Human Resources Subcommittee whose chair, Rep. Susan Lynn, wouldn’t agree to hear from injured workers in attendance and hoping to testify. She said they could all speak once the bill is heard in Eldridge’s full committee. We hope they can talk fast.
Everywhere you look these days you see energy drinks. At gas stations, grocery stores, and promoted on popular race cars, the bottom of snow boards, and the sides of motorcycle helmets. Energy drinks are big business. According to one source, in 2011, the sale of energy drinks accounted for nearly $9 billion in sales. But are they safe? And more specifically, are they safe for children and teenagers?
Energy drinks are obviously to young people. Should we be concerned? What about kids playing sports and drinking energy drinks as a performance enhancer?
One problem with energy drinks is that they are considered “dietary supplements.” Dietary supplements are governed by specific legislation, which allows the drinks to escape scrutiny from the FDA. Because they are considered “dietary supplements”, the producers of these drinks are not required to disclose the ingredients.
Recent studies reveal that there are safety issues with energy drinks. This should come as no surprise. Keep in mind, products like “Ultimate Orange” and “Hydroxycut” were popular energy supplements with athletes and bodybuilders in years past, and some of those supplements allegedly resulted in serious health conditions, including death. In fact, the primary ingredient used for years in stimulant supplements, ephedrine, contains essentially the same chemical structure as cyrstal meth. Ephedrine is now regulated, and hence, OTC medications containing ephedrine or ephedra or pseudoephedrine are difficult to buy over the counter because the ingredients can be used to make crystal methamphetamine.
An example of the serious risks of some energy supplements is found in the following quote from the Los Angeles Times in 2001.
At least three football players who died this year–Devaughn Darling of Florida State, Rashidi Wheeler of Northwestern and Curtis Jones, who played for a Utah indoor team–were found to have traces of ephedrine in their systems when they died.
In September, the NFL added ephedrine to its list of banned substances, following the lead of the NCAA and International Olympic Committee.
The NFL bans the use or distribution of products that include ephedrine, unless they are prescribed for medical use by a team physician. Also, teams and players are banned from endorsing manufacturers or distributors of those substances.
The ingredients in energy drinks have the same effects and the same potential consequences as the energy supplements that have been linked to multiple deaths in athletes a decade ago. For example, the literature suggests that energy drinks raise blood pressure, increase heart rate, and place individuals with pre-existing cardiovascular disease at increased risk for serious medical conditions. In other words, the studies suggest that energy drinks could be harmful to certain individuals, especially younger individuals with undiagnosed heart conditions.
Note: Some of the information contained in this blogpost came from an article written by Kevin I. Goldberg that appeared in the March 2013 issue of Trial magazine.
Today, in Joshua Cooper v. Logistics Insight Corp., (1/16/13), the Tennessee Supreme Court affirmed two prior rulings in which it held that an employer’s subrogation right against an employee’s recovery from a third party in a negligence case does not include the amount of future medical benefits to be provided to the employee.
Mr. Cooper was an employee of MasterStaff, Inc., which assigned him to work at ProLogistics, Inc. Mr. Cooper was using a towmotor to move pallets from a trailer parked at a loading dock into the ProLogistics warehouse. An employee of ProLogistics moved the truck away from the dock as Mr. Cooper was backing out of the truck, and the towmotor fell out of the trailer. Mr. Cooper sustained “significant, permanent injuries” to his back and spine.
Mr. Cooper sought workers’ compensation benefits from MasterStaff and also filed a negligence claim in Rutherford County Chancery Court against ProLogistics and Logistics Insight Corp. MasterStaff intervened in the negligence action, asserting a statutory subrogation claim, including recovery of the amount of future medical benefits that it may be required to provide under the Workers’ Compensation Law.
Mr. Cooper settled his negligence claim against the defendants in Chancery Court and reimbursed MasterStaff for medical expenses paid on his behalf. MasterStaff asserted that the settlement did not dispose of all the claims regarding future medical expenses. The trial court disagreed and granted a motion to dismiss. The Court of Appeals held that future medical expenses could be proven by MasterStaff and remanded to the trial court for a determination of the amount of future medical benefits.
Today, the Tennessee Supreme Court reversed the Court of Appeals and affirmed the trial court, unequivically holding that an employer’s lien against an employee’s recovery from a third party provided by Tennessee Code Annotated § 50-6-112 does not extend to the amount of future medical benefits to be provided by the employer.
After passing Congress late in 2012, the President has signed the SMART Act into law. The Medicare Secondary Payer Act is supposed to guarantee that Medicare does not pay medical bills that are the primary responsibility of a third party. The SMART Act amends the Medicare Secondary Payer Act to streamline and improve the reimbursement process.
Section 201 (Calculating a Final Conditional Payment Amount & Appeals)
The Web Portal
CMS is required to maintain a secure web portal with access to claims and reimbursement information. The web portal must meet the following requirements:
- Payments for care made by CMS must be loaded into the portal within 15 days of the payment being made.
- The portal must provide supplier or provider names, diagnosis codes, dates of service and conditional payment amounts.
- The portal must accurately identify that a claim or payment is related to a potential settlement, judgment or award.
- The portal must provide a method for receipt of secure electronic communications from the beneficiary, counsel, or the applicable plan.
- Information transmitted from the portal must include an official time and date of transmission.
- The portal must allow parties to download a statement of reimbursement amounts.
The Reimbursement Process
The SMART Act requires parties to notify CMS of when they reasonably anticipate settling a claim (any time beginning 120 days before the settlement date). CMS then has 65 days to ensure the portal is up to date with all of the appropriate claims data. CMS can have an additional 30 days on top of the 65 days to update the portal if necessary. At the expiration of the 65 and potentially the 30 day periods, the parties may download a final conditional payment amount from the website. The final conditional payment amount is reliable as long as the claim settles within 3 days of the download.
Resolution of Discrepancies
CMS is required to provide a timely process to resolve any discrepancies regarding the amount to be reimbursed. An individual can provide the Agency documentation to establish that the web portal is not reflecting an accurate reimbursement amount. CMS is required to respond to this documentation within 11 business days. If CMS does not make a determination within 11 days, the reimbursement amount as calculated by the beneficiary becomes the final conditional payment amount.
CMS must draft regulations that give applicable insurance plans limited appeal rights to challenge final conditional payment amounts. These appeal rights are only applicable in the event CMS attempts to collect reimbursement from the plan. Beneficiaries must be given notice of any appeal undertaken by an insurance plan. Existing appeal rights for beneficiaries remain the same.
Section 202 (Claims Threshold for Collection)
CMS, with input from the GAO, is required to calculate and implement a threshold amount for liability claims (excluding ingestion, implantation, and exposure claims) only. The threshold amount will be based on the costs to CMS for collecting an average claim. If an amount owed is under that threshold amount, CMS is barred from seeking repayment. The threshold will be calculated and adjusted annually.
Section 203 (Reporting Requirements)
CMS has discretion in applying reporting penalties on insurance companies. Previously, any reporting error by an insurer was subject to a $1,000 a day penalty. The SMART Act amends the statute to allow for discretion in the amount of the penalty based on the severity of the violation.
Section 204 (Use of Social Security Numbers in MSP Reporting)
CMS is required to modify plan reporting requirements within 18 months so that plans do not have to use SSN or health id claim numbers (HICN). CMS may have an additional 12 months if it affirms to Congress it needs more time. This provision addresses several policy concerns related to privacy and reporting problems.
Section 205 (Statute of Limitations)
CMS only has 3 years from the time they are notified of a settlement to seek payment for medical services provided. This provision will eliminate a CMS push for a 6-year statute of limitations that had recently been argued in the 11th Circuit.
(This summary was provided by AAJ)
In Skaan v. Federal Express Corp, an opinion filed by the Court of Appeals of Tennessee at Jackson on December 13, 2012, the Court examined a contractual limitation provision in an employment contract. The plaintiff filed a workers’ compensation claim and was eventually discharged from his employment. Eight months after being termination, he filed a lawsuit for retaliatory discharge. The defendant moved to dismiss the lawsuit by summary judgment based upon the following language found in the employment agreement:
“To the extent the law allows an employee to bring legal action against Federal Express Corporation, I agree to bring that complaint within the time prescribed by law or 6 months from the date of the event forming the basis of my lawsuit, whichever expires first.”
In Tennessee, there is a “strong public policy in favor of upholding contracts. . . . absent fraud or duress, the law generally holds parties responsible for what they sign.” The Court then ruled that a determination of whether the contract was enforceable was a question of law; and thus, an appropriate determination for summary judgment.
In Tennessee, parties may contract for a limitation period shorter than the period prescribed by law; though it must be reasonable. The Court held that the contractual limitation period was enforceable, and thus, the plaintiff’s claim was dismissed. The Court cited Morgan v. Town of Tellico Plains, 2002 WL 31429084 (Tenn.Ct.App. Oct. 30, 2002)(upholding a 60 day contractual limitation period) as support for the holding.