Travelers Indemnity v. Portal Healthcare Solutions

The US Court of Appeals for the Fourth Circuit rendered an unpublished opinion on the above referenced action pursuant to cross-motions for summary judgment filed by the parties in US District Court for the Eastern District of Virginia.  The dispute arose over whether Travelers had a duty to defend Portal against class-action allegations that Portal posted confidential medical records on the internet.  The US District Court concluded that Travelers did have a duty to defend Portal against the underlying class action and the US Court of Appeals affirmed.  Keep in mind that an insurer’s duty to defend is generally construed more broadly than its duty to indemnify.

The district court included the following paragraph in the background section related to the language found in the 2012 and 2013 policies issued by Travelers:

The 2012 and 2013 Policies obligate Travelers to pay sums Portal becomes legally obligated to pay as damages because of injury arising from (1) the “electronic publication of material that … gives unreasonable publicity to a person’s private life” (the language found in the 2012 Policy) or (2) the “electronic publication of material that … discloses information about a person’s private life” (the language found in the 2013 Policy). (See doc. 1, at 5-6)

Personal and advertising injury liability coverage is offered under Coverage B in the CG 00 01 04 13 CGL policy form published by ISO.  The insuring agreement for Coverage B covers sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury” to which this insurance applies.  The insuring agreement also covers defense of the insured against any “suit” seeking those damages.  “Personal and advertising injury” means injury, including consequential “bodily injury”, arising out of one or more of the following offenses:  …e.  Oral or written publication, in any manner, that violates a person’s right of privacy.  In the Travelers case, the district court concluded (and the appeals court affirmed) that making confidential medical records publicly assessable via an internet search does fall within the plain meaning of “publication”, even if the publication was unintentional.  The court also determined that posting confidential medical records online without security restriction gives “unreasonable publicity” to, and “disclosure” of information about, patients’ private lives.

I believe one could argue that, given similar circumstances to those in the Travelers case, there is at least the potential for coverage under the ISO CGL form sufficient to give rise to a duty to defend on the part of the insurer.

Turning to the issue of limits, the most common limits we see on a standard CGL policy are $1,000,000 with a general aggregate limit of $2,000,000.  In the ISO CG 00 01 04 13, Section III – LIMITS OF INSURANCE, Part 1. states:

1.  The limits of Insurance shown in the Declarations and the rules below fix the
most we will pay regardless of the number of:

a.  Insureds;
b.  Claims made or “suits” brought; or
c.  Persons or organizations making claims or bringing “suits”.

2.  The General Aggregate Limit is the most we will pay for the sum of:

a.  Medical expenses under Coverage C;
b.  Damages under Coverage A, except damages because of “bodily injury” or
“property damage” included in the “products-completed operations
hazard”, and
c.  Damages under Coverage B.

The following subpart also applies to the “personal and advertising” limit;

4.  Subject to Paragraph 2. above, the Personal and Advertising Injury Limit is the most we will pay under Coverage B for the sum of all damages because of all “personal and advertising injury” sustained by any one person or organization.

My reading of the above policy language from the ISO CGL policy, and supported by expert commentary from IRMI – How the Limits Apply in the CGL, the Personal and Advertising limit applies separately to each person or organization that sustains damages because of a covered offense or offenses. Consequently, in an action by multiple plaintiffs arising out of the same offense, multiple Personal and Advertising limits could be exposed but limited by the general aggregate limit under each policy period. Once the aggregate limit under the policy is exhausted, no further claims be made against the policy term as set forth in Part 2 above, with the exception of products-completed operations losses.

One of the key findings in this case is that “publication”, for purposes of qualifying for coverage under personal and advertising injury coverage in a CGL, does not have to be intentional nor would it have to be actually accessed by an outside party. This raises the possibility for coverage for “personal and advertising injury” for accident publications of information which violates a person’s right to privacy.

ISO has developed several coverage endorsements which provide more flexibility in how insurers choose to address cyber exposure, including an optional endorsement which deletes the invasion of privacy-related offense from the definition of personal and advertising injury applicable to Coverage B under the ISO CGL Coverage Form. A summary of some of these options can be found in an article published by Insurance Journal – ISO Comments on CGL Endorsements for Data Breach Liability Exclusion.

Urban Friesz works as a Vice President and Senior Claims Specialist in our Minneapolis, MN location. He can be reached by phone at 952-229-8856 or by email at urban.friesz@bmsgroup.com

Disclaimer: This article and the Website content that can be linked to through this article are offered for informational purposes only. The article and linked-to Website content are made available without warranty of any kind. They are not offered or intended as advice on any specific facts or circumstances, and you should not rely on them as a substitute for independently obtaining such advice.

 

McCall v. United States, So.3d, 2014 WL 959180 (Fla. 2014)…What Next?

McCall v. United States, — So.3d —-, 2014 WL 959180 (Fla. 2014)

This case involves a sad scenario where a young mother died from cardiac arrest due to excessive blood loss following the birth of her son.  The US District Court for the Northern District of Florida found the defendant medical practitioners liable and awarded the surviving petitioners $980,462.40 in economic damages and $2,000,000 in noneconomic damages.  The district court capped the noneconomic award to $1,000,000, pursuant to Florida statute §766.118.  Florida Statute §766.118 provides for limitations on noneconomic damages stemming from medical negligence actions.  Full text of this section can be viewed at http://www.flsenate.gov/laws/statutes/2011/766.118. The plaintiffs appealed to the Eleventh Circuit Court which certified four questions to the Florida Supreme Court.  The Florida Supreme Court answered the first question as rephrased below in the affirmative and declined to answer the other three.

DOES THE STATUTORY CAP ON WRONGFUL DEATH NONECONOMIC DAMAGES, FLA. STAT. § 766.118, VIOLATE THE RIGHT TO EQUAL PROTECTION UNDER ARTICLE I, SECTION 2 OF THE FLORIDA CONSTITUTION?

The court applied the rational basis test and determined that section 766.118 violated the Equal Protection Clause of the Florida Constitution.  According to precedent established by the Florida Supreme Court, to pass the rational basis test, the statute being challenged must serve a legitimate governmental purpose and it must be reasonable for the legislature to believe that the challenged classification would promote that purpose.  The court concluded that “The statutory cap on wrongful death noneconomic damages fails because it imposes unfair and illogical burdens on injured parties when an act of medical negligence gives rise to multiple claimants. In such circumstances, medical malpractice claimants do not receive the same rights to full compensation because of arbitrarily diminished compensation for legally cognizable claims. Further, the statutory cap on wrongful death noneconomic damages does not bear a rational relationship to the stated purpose that the cap is purported to address, the alleged medical malpractice insurance crisis in Florida.” (Opinion page 9, paragraph 2)

As previously noted, this case involves the death of a patient with three claimants seeking redress under the wrongful death statute.  So, what if the patient lives?  What if there is only one claimant?  How does the McCall opinion impact application of the cap in those instances?

The Court rephrased the first certified question to specify wrongful death economic damages rather than the more general noneconomic damages as originally stated.  The Court goes on to state in the statutory provision section of the opinion that at issue is Florida’s statutory cap on wrongful death noneconomic damages in medical negligence actions as articulated in section §766.118.  Footnote 2 further states that the legal analysis for personal injury damages and wrongful death damages are not the same and that the analysis on the present case is exclusively related to wrongful death.  These statements, collectively, would appear to limit the influence of the opinion to strictly wrongful death actions involving multiple claimants.

We know from reading the opinion that wrongful death remedies are made available through the Florida Wrongful Death Statute §768.16-768.26 and remedies for personal injuries resulting from tortious activity are derived from common law.  However, Florida Statute § 766.118(2-6) does not appear to differentiate causes of action for personal injury from wrongful death when determining applicable caps for noneconomic damages.  There are four parts Application of the caps under sub parts (a) and (b) stem from causes of action for personal injury or wrongful death.  Further, noneconomic damages are not distinguished by causes of action for personal injury or wrongful death.  §766.202(8) defines “noneconomic damages” to the extent the claimant is entitled to recover under general law, including the Wrongful Death Act.

It is difficult to predict how future cases will be evaluated by the Court.  While the Court makes it clear that the conclusion in McCall applies only to application of noneconomic caps in wrongful death actions, the structure of the statute doesn’t appear to specifically delineate application between wrongful death actions and person injury actions.  Further, expansive research provided in the opinion suggesting that if Florida ever had a medical malpractice crisis, it is over, seems to undermine § 766.118 in its entirety under the rational basis test for analyzing the right of equal protection under Article I, Section 2 of the Florida Constitution.

 

If you have any comments/questions about my blog or would like to contact me, please email: urban.friesz@bmsgroup.com

Disclaimer: This article and the Website content that can be linked to through this article are offered for informational purposes only. The article and linked-to Website content are made available without warranty of any kind. They are not offered or intended as advice on any specific facts or circumstances, and you should not rely on them as a substitute for independently obtaining such advice.

 

 

Are We Done with PCS Winter Storm Losses for 2014?

With February 28 marking the close of meteorological winter (December – February), a mountain of interesting stats are about to be released – so be prepared for media fact overload!

For the most part, these facts should show that points east of the Mississippi have experienced one of the coldest, snowiest winters since the late 1970s – and in some cases, depending on the area, the coldest, snowiest ever or at least since 1917. But, as last spring proved, the weather doesn’t pay close attention to the calendar. As a reminder, the north-central U.S. was cold and snowy with North Dakota having a record cold April and Duluth, MN having its snowiest month ever – helping to contribute to the fifth-largest April U.S. snow cover extent on record. Given the long-range forecasts, the extreme cold and some significant snow will continue in March, which will add to the records and likely create new ones.

The average U.S. temperature anomaly from Dec 1 – Feb 26 (shown below) clearly demonstrates the U.S. as a whole has been colder than the 30-year average. In fact, it would appear the U.S. has experienced 6 – 7 Polar Vortex episodes of cold air, when the nation’s average temperature anomaly dropped below -4 C (25 F). Interestingly, the nation as a whole was colder for a longer period of time during the first Polar Vortex outbreak during the second weekend in December than it was during the main event on January 5 – 8 – which the media dubbed the “Polar Vortex.”

Are we Done with PCS Winter Storm Losses for 2014?

Image Source: Weatherbell.com – Ryan Maue

To-date, PCS has estimated $1.5B in loss due to the media-dubbed “Polar Vortex.” This freezing, ice, snow and wind event brought blizzard-like conditions to some areas of the country, with cold air producing wind chills as low as -60 F and gusts of up to 45 miles per hour with white-out conditions. The cold temperatures often forced schools and businesses to close and caused water damage from frozen and burst pipes. The frontal system impacted many states as it moved south and east across the United States – including Mississippi and Georgia, which saw extensive damage from the wrath of this extreme event.

So far this meteorological winter season, five PCS Winter Storm events have contributed to $2.1B in loss – and $2B of that has come in 2014. Given that PCS digital records only go back to the 1950s and the PCS definition of a Winter Storm can be multifaceted (potentially including severe weather aspects such as tornadoes and hail) it is difficult to estimate the true Winter Storm component of PCS losses.

So… Have we seen the end of the Winter Storm losses for 2014?

Looking at the PCS Winter Storm data in January and February that include Winter Storm event perils such as snow, wind, ice, flooding and freezing – but exclude Severe Convective Storm  (SCS) event perils such as tornadoes and hail for states east of the Mississippi, the answer is essentially “yes” – with a projected 93% of the loss already incurred based on historical loss development. There are only five years on record when Winter Storm losses occurred in March, with the biggest impacts happening during the historic winter of 1976.

However, if you base the answer on the wider definition of Winter Storm perils, which include SCS events, we are not done yet. The U.S. could easily still experience a Winter Storm that creates severe weather such as tornadoes and hail across the southern states while producing Winter Storm-like perils across the north. A classic example of this type of PCS event is the March 12 – 14 1993 Storm of the Century, also known as the ’93 Superstorm (1993 PCS #46). The 1993 Superstorm still ranks as one of the costliest Winter Storm events of the 20th century, creating a PCS CPI adjusted loss of $2.8B. Based on the definition of Winter Storm that would include SCS perils, only 71% of losses have occurred thus far in 2014. With March roaring in like a lion and more cold, snow and severe weather forecasted for the eastern half of the nation over the next few weeks, we should anticipate adding yet more losses to the PCS Winter Storm total.

The Med Mal Reform Bill

Urban Friesz, BMS’ Vice President of Claims discusses his research on the recent med mal reform bill that passed in the US House of Representatives last week:

The US House of Representative passed legislation on March 22, 2012, that the Congressional Budget Office projects will reduce direct and discretionary spending by $46.6 billion over the 2013-2022 period (H.R. 5, Help Efficient, Accessible, Low-Cost, Timely Healthcare (HEALTH) Act of 2011).

The bill, labeled H.R. 5, contains significant implications for medical malpractice insurance carriers and, in a prior form, could have meant big changes in how insurance is regulated in the United States. The McCarran Ferguson repeal amendment, which is part of the broader bill, has since been narrowed to exempt property and casualty and life products. The McCarran-Ferguson ACT of 1945 (15 U.S.C.A. § 1011 et seq.) recognized authority among the states to regulate the business of insurance unless federal law specifies otherwise. Broad repeal of this act would have likely meant larger regulatory oversight by the federal government under the Commerce Clause of the US Constitution.

The Bill Summary & Status published on the Library of Congress website lists the following elements of the bill:

• Sets conditions for lawsuits arising from health care liability claims regarding health care goods or services or any medical product affecting interstate commerce.

• Sets a statute of limitations of three years after the date of manifestation of injury or one year after the claimant discovers the injury, with certain exceptions.

• Limits noneconomic damages to $250,000. Makes each party liable only for the amount of damages directly proportional to such party’s percentage of responsibility.

• Allows the court to restrict the payment of attorney contingency fees. Limits the fees to a decreasing percentage based on the increasing value of the amount awarded.

• Allows the introduction of collateral source benefits and the amount paid to secure such benefits as evidence. Prohibits a provider of such benefits from recovering any amount from an award in a health care lawsuit involving injury or wrongful death.

• Authorizes the award of punitive damages only where: (1) it is proven by clear and convincing evidence that a person acted with malicious intent to injure the claimant or deliberately failed to avoid unnecessary injury the claimant was substantially certain to suffer; and (2) compensatory damages are awarded. Limits punitive damages to the greater of two times the amount of economic damages or $250,000.

• Denies punitive damages in the case of products approved, cleared, or licensed by the Food and Drug Administration (FDA), or otherwise considered in compliance with FDA standards.

• Provides for periodic payments of future damages.

As with any political issue, there are arguments for and against tort reform. In theory, constricting the universe of exposure reduces uncertainty and allows medical liability insurers to more accurately price insurance for practicing physicians and medical providers. Many argue that this reduction in risk also discourages practitioners from ordering unnecessary tests and procedures that serve to protect them from liability in the event of a lawsuit for medical malpractice (defensive medicine). Opponents of the bill argue that establishing caps on liability awards denies victims of medical negligence fair compensation for their injuries. They also refute that these reforms significantly reduce the cost of providing medicine.

As of March 28, 2012, govtrack.us predicts HR 5 has a 13% chance of passing congress. The related bill in the Senate S 1099 is showing an 8% chance of passing.

If you have any comments/questions about my blog or would like to contact me, please email: urban.friesz@bmsgroup.com

Disclaimer: This article and the Website content that can be linked to through this article are offered for informational purposes only. The article and linked-to Website content are made available without warranty of any kind. They are not offered or intended as advice on any specific facts or circumstances, and you should not rely on them as a substitute for independently obtaining such advice.

Why claims handling is important to BMS

Kris Westall joined BMS in January 2011, bringing over 25 years of experience in claims and accounting operations. Listen to Kris discuss her views on the vital need for an integrated claims team.

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