Around the Nation: September 2012

Around the Nation: September 2012

News from CLM state chairs, committees, and members.

By Bevrlee J. Lips


Hospital Liens and Medicaid Patients

The Wisconsin Supreme Court recently ruled that a charitable hospital could pursue payment for care provided to a Medicaid-eligible patient by filing a lien against a future settlement between the patient and the tortfeasor’s insurer. By a 4-3 majority, the court reversed the lower appellate court in Gister v. American Family Mut. Ins. Co., holding that the “soundest harmonization” of the legal framework surrounding Medicaid with Wisconsin’s hospital lien statute, Wis. Stat. § 779.80, permits a hospital lien because it is not a “direct charge” upon the plaintiff, as opposed to sending a bill to that individual. The majority found no distinction between filing a hospital lien and the joining of a personal injury lawsuit. In both scenarios, the majority concluded that “the money being sought originates from the same source…goes to the same recipient…and is designated for the same purpose.” —From Wisconsin State Lead Chair Patrick D. McNally


Name the Right Defendant

Peggy Worthington and Milton Davis were involved in a car accident on Dec. 10, 2007. Worthington claimed negligence and filed a complaint on Dec. 9, 2009, naming Davis as the defendant. Unknown to Worthington, Davis died in September 2008. On Jan. 27, 2010, Thomas A. Huntsberger was appointed as the personal representative of Davis’ estate. The next day, but after the two-year statute of limitations on a negligence claim had passed, Worthington amended her complaint to name Davis’ estate and Huntsberger as defendants. In trial court, the estate argued that both complaints should be dismissed because the statute of limitations on the negligence claim had ended, and the name change in the amended complaint did not relate back to the original. The estate characterized the case as one of misidentification and claimed the amended complaint changed who was being sued. The trial court agreed and dismissed the complaints. The Court of Appeals affirmed. —From Oregon State Chapter Member Jack Levy


Damage Cap Impedes Trial by Jury

In July, the Missouri Supreme Court held that the state’s medical malpractice non-economic damage cap of $350,000, a part of Missouri’s 2005 tort reform, is unconstitutional. In Watts v. Lester E. Cox Medical Centers et al., a common law medical malpractice claim, the court found the damage cap infringed on the right to a trial by jury. The court struck down a prior 1992 Missouri Supreme Court opinion, Adams v. Children’s Mercy Hospital, which held that the then-existing non-economic damage cap did not violate the right to trial by jury. The majority in Watts sidestepped 20 years of case law and the doctrine of stare decisis by finding that the Adams case had been mistakenly decided. While Watts did not specifically address the issue, the cap may still apply to wrongful death medical malpractice claims, as wrongful death claims in Missouri are statutory, not common law, causes of action. —From Missouri State Lead Chair Jeff Brinker


Tightening Up Indemnitor Liability Language

Louisiana’s anti-indemnity statute, La. Rev. Stat. §9:2780.1 (effective on January 1, 2011), was amended in the 2012 legislative session due to arguments that the statute potentially banned all additional insured obligations. These amendments clarify that the statute shall not affect the validity of construction contracts requiring one party to obtain coverage to insure the obligation to defend and indemnify, as long as evidence exists that the indemnitor recovered the cost of the required insurance in the contract price. However, the indemnitor’s liability under such a contractual provision is limited to the amount of the proceeds payable under the insurance policy that the indemnitor was required to obtain. Lastly, the statute shall not invalidate additional insured obligations where the indemnitor is at least partially liable (i.e., no indemnity for sole negligence). —From Louisiana State Lead Chair Richard King


New Regulations Related to Exempt Insurers

The Tennessee Commissioner of Insurance has issued guidance and a form for implementation of Public Chapter No. 878 regarding commercial risk policies issued to exempt commercial risk policyholders. This new section to the Tennessee code took effect on July 1, 2012, and, among other things, imposes penalties if the commercial risk insurer fails to comply with statutory requirements and the policyholder has not filed the required certification. The commissioner’s memorandum establishes a self-reporting form to be completed and submitted each year. —From Tennessee State Lead Chair James Wright


Apportionment of Fault in Question

While staying in a hotel owned by Abu Rahmatullah, James Santelli was murdered by Joseph Pryor during a botched robbery. Pryor was a former maintenance man who walked off the job, but retained a master key. In Santelli v. Rahmatullah, the Indiana Court of Appeals addressed the effect of the state’s Comparative Fault Act on the common-law very duty doctrine—the jury apportioned one percent fault to Santelli, two percent to Rahmatullah, and 97 percent to Pryor. The apportionment effectively precluded any meaningful recovery for Santelli’s estate. On review, the court adopted the Restatement (Third) of Torts § 14, entitled, “Tortfeasor Liability for Failure to Protect the Plaintiff from the Specific Risk of an Intentional Tort.” Accordingly, it held that Rahmatullah was jointly and severally liable for the full sum of the damages. The case is currently pending transfer to the Indiana Supreme Court. —From Indiana State Lead Chair Kirk LeBlanc


Courts Closed to Cut Budget

The entire Kentucky court system was closed on Aug. 6 and Sept. 4, and is scheduled to close again on Oct. 15. The closures are in response to a $25.2 million state budget cut. All court services will be unavailable, and courthouses will be closed. Non-elected court personnel will be off work without pay for the three days. The days will be treated as furlough days and were offered as an alternative to reducing employment. The action has caused concern for those people who will need critical services and may be seen as a harbinger for other states as they seek to balance their own strained budgets. —From Kentucky State Lead Chair Kim Newman


Disclaimer Must Be Inclusive

The Georgia Supreme Court recently held that an insurer was estopped from asserting a coverage defense not included in its coverage denial letter. In Hoover v. Maxum Indemnity Co., the court rejected the common practice of including reservation of rights language in coverage denials. An insurer cannot deny a claim outright and also reserve the right to assert different defenses in the future. Under Hoover, a denial letter, and apparently a reservation of rights letter, must list and explain all coverage defenses upon which the insurer will later rely. Hoover therefore overrules prior Court of Appeals decisions holding that reservation of rights letters need not “list each and every basis for contesting coverage….” Additionally, the insurer did not consistently assert the late-notice defense in subsequent litigation, which the court found to be a waiver of that defense. —From Georgia State Chapter Member Matthew Barrett

Bevrlee J. Lips was managing editor of Claims Management magazine (now CLM Magazine) from January 2012 until March 2017.

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