Segal McCambridge Legal Blog

Social media’s popularity and reach have grown rapidly and exponentially in the last several years. The prospect of a negative incident or situation going viral poses a real reputational risk to product makers, and so, too, to their bottom lines. Accordingly, companies must have a plan in place to deal with social media crises. The plan should achieve several basic aims: provide for effective monitoring of social marketing sites; and ensure a timely initial response and coordinated and consistent ongoing outward communications during the course of the crises. Advance preparation and coordination is key. With whom responsibility for managing crises response lies should be clear and settled. The roles of the various groups within the company, management, marketing, IT, legal, etc., should be clearly defined. Mock crises response drills should be conducted. Companies that fail to take steps to guard against social media crisis needlessly expose themselves to an heightened level of risk.

On September 13-14, 2012, the Diversity Law Institute held its annual Diversity Summit in Chicago. The event brought together legal minds from across the country to create a compelling discourse on diversity issues. Segal McCambridge Singer & Mahoney, co-host, kicked off the Summit on Thursday evening with a cocktail reception in the firm’s Willis Tower offices. Friday’s colloquium took place at the Chicago Gleacher Center. Speakers and participants discussed ideas and issues surrounding diversity in the practice of law. Following the round table discussions, the DLI presented awards to select law firms in recognition of their support of diversity and the Diversity Law Institute. The group then headed to Boka, a Michelin-starred restaurant in the Lincoln Park neighborhood, for a closing meal.

The Litigation Counsel of America (LCA) and Faegre Baker Daniels also co-hosted the 2012 Diversity Summit. Visit the LCA’s Litigation Commentary and Review to read a full recap of the event, view the Summit’s agenda, and see pictures.

For a defendant,  ‘removing ‘ a case that is, taking a case filed in a state court and moving it over to a federal court may be the most critical step taken in the case.   Often times it makes the difference between winning and losing.   This is because in a federal forum, legal standards are generally more rigorous and defendants are more likely to get a receptive hearing.

The federal courts strictly enforce the rules governing removal. But understanding and complying with those rules can be tricky.

For example, the rules say that a defendant must remove the case  within 30 days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading.  An out-of-state defendant is often  served through a statutory agent, such as a Secretary of State.   Does service of a summons and compliant on a statutory agent qualify as  receipt by the defendant.   Recently, in Ackerman v. PNC Bank, Nat. Assn. (Aug. 13, 2012), a Federal District Court, answered this question.   It found, applying the now settled rule,  that service on a statutory agent does not start the removal clock.   Rather, it begins when the defendant itself actually receives the summons and complaint.

Corporate defendants and their attorneys know well the plethora of potential benefits associated with litigating a case in a federal rather than state court.   Having an action heard by the federal judiciary may dramatically increase the likelihood of a positive outcome and almost certainly reduces a defendants financial exposure should it lose.   This being the case, most plaintiffs attorneys will do almost anything to avoid litigating and trying their cases in federal court.     So knowing and complying with the removal rules is critical, and a defendant that fails to do so may unintentionally forego its right to a more favorable forum, thus diminishing if not destroying its chances of winning the case.

Paul E. Wojcicki

Freddy Fonseca

In a recent Alert, the Centers for Medicare and Medicaid Services posted new mandatory minimum Total Payment Obligation to Claimant reporting thresholds as applicable through January 2015. What sets this June 20, 2012 Alert apart from previous directives is that the minimum TPOC reporting thresholds previously decreased to no threshold – such that all liability insurance (and self-insurance) personal injury settlements, judgments, awards and other payments to a Medicare beneficiary would require reporting in 2015. The June 20 Alert gradually decreases the minimum TPOC amount to $300. Thus for cases with a TPOC date on or after 10/1/2014, if the TPOC is over $300, the settlement will need to be reported in the first quarter of 2015. The current TPOC minimum threshold requires reporting where the settlement, judgment, award or other payment exceeds $50,000. This amount decreases over the upcoming months as set forth in the Alert.

With this Alert, the $300 threshold previously implemented for certain liability insurance (and self insurance) recovery cases, that had excluded exposure, ingestion and inhalation cases, will now apply to all liability insurance and self insurance recovery cases. Click here to read the Alert.

Similar Alerts were issued regarding Workers’ Compensation and are available here.

In June 19′s NGHP Town Hall Teleconference, the CMS stated that Alerts were forthcoming and a new MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting User Guide ought to issue before the 4th of July holiday.

In a recent ruling in New Jersey by The Hon. Carol Higbee, a Segal McCambridge client was dismissed from over 900 cases.  In her May 4, 2012 decision, Judge Higbee granted the motion to dismiss filed by the firm, agreeing that a generic drug manufacturer whose product is unilaterally designated by FDA as the Reference Listed Drug (RLD) does not have regulatory responsibilities beyond those of any other generic drug manufacturer.  The client in these matters is represented by Bob O'Malley, a partner in the Chicago office.

An article about this decision was published in Bloomberg BNA’s Product Safety & Liability Reporter on May 14, 2012. To read the article, click here.

Today, the article I wrote with my colleague John Lee, "Climate Change Claims: The Next Y2K Insurance Litigation Scare?" appears in the current issue of Business Insurance. Just before publication, I was able to modify the article to include mention of recent developments in one of the cases, AES Corp. v. Steadfast Ins. Co. On April 20, 2012, the Virginia Supreme Court affirmed its prior ruling that Steadfast Ins. Co. has no obligation to defend or indemnify AES Corp. in a climate change liability case arising out of an underlying suit brought by the Village of Kivalina, Alaska. The court found no coverage because the underlying complaint alleged damages that were the "natural and probably consequence" of AES's intentional actions.  Consequently, the court noted that the complaint did not allege a fortuitous accident or event. As we explain in the article, Kivalina is an Inupiat island community in the Arctic waters just off the Alaskan coast. Residents sued ExxonMobil and others energy firms, claiming the companies' activities were contributing to global warming which damaged the sea ice that protects the island's coast from storms. Shoreline erosion, the suit claimed, would ultimately force the population to relocate.

As has happened in similar cases, the judge dismissed the case as centering on "non-justiciable" issues, or issues better addressed through political, rather than judicial, means. The underying case is on appeal.

To read the entire Business Insurance article, click here.  (Free registration required to read the complete article.)

In a very disappointing decision, the Indiana Supreme Court's opinion in the Flexdar matter, handed down yesterday, is not favorable to insurers.  In a 3-2 decision, the court concluded that the standard absolute pollution exclusion in CGL policies is ambiguous and that the standard ISO modification endorsement did not resolve the ambiguity in the exclusion.  In one bright note, the court did hold that a 2005 "Indiana Changes — Pollution Exclusion" endorsement drafted by State Auto, which was not included in the policies at issue, did "resolve any question of ambiguity," so policies with similar pollution exclusion endorsements should be applicable under Indiana law.

To read the decision, click here.

Since December 5, 1980, Medicare has been a secondary payer, meaning that if a Medicare recipient has another source of funds for medical care, that source must pay first. Thus, in personal injury actions where an injured plaintiff whose related treatment was paid for by Medicare, Medicare must be reimbursed out of funds from a settlement, judgment or other award.  Medicare has just implemented a $300 settlement threshold for certain Liability Insurance cases.  For cases meeting the below criteria, where the lump sum settlement payment was $300 or less, Medicare will not seek to recover from the settlement, judgment or award.  This limit to recovery does not apply to exposure cases, such as asbestos-related disease cases, nor does it apply to cases where an insurer is paying on-going medical bills. The criteria established by MSPRC is (quoting from  http://www.msprc.info/index.cfm?content=toolkitsalert):

• The beneficiary’s settlement, judgment, award or other payment claims/releases a physical trauma-based incident/injury/accident/illness. (This does not include alleged ingestion, implantation or exposure-based incident/injury/accident/illness).
• The beneficiary obtains a liability insurance (including self- insurance) settlement, judgment, award, or other payment for a Total Payment Obligation to Claimant (TPOC) of $300 or less.
• There are no multiple settlements, judgments, awards or other payments for the same underlying claim which total more than $300.
• A demand [letter from MSPRC] has not been issued.

Currently, reporting requirements under the Medicare Secondary Payer (MSP) Act require claims resolved on or after October 1, 2011 for over $5,000 to be reported to the Centers for Medicare and Medicaid Services (CMS) starting January 1, 2012. In an effort to analyze the impact of the threshold on both funds recovered and costs of compliance, RAND looked at data from auto injuries and medical malpractice claims in a recently published Occasional Paper, “Recovery Under the Medicare Secondary Payer Act: Impact of Reporting Thresholds.” RAND authors Eric Helland and Fred Kipperman concluded that maintaining a reporting threshold for cases resolved, such as $5,000, will have a minimal impact on revenue and significantly relieve reporting burdens. Using auto accidents as an example, and  assuming there is no reimbursement to Medicare from recoveries on claims under the threshold, “retaining the $5,000 reporting threshold would reduce recoveries by 2.4 percent, or $24 million, while reducing the number of claims that must be reported by 43 percent.” As many insurers have implemented procedures to address conditional payments on every claim involving a Medicare recipient, regardless of the reporting threshold, it is possible this reduction in recovery will be even less, with great savings to the insurance industry. As costs are often passed on to consumers, many may benefit should CMS maintain a $5,000 reporting threshold.
The RAND paper may be accessed at http://www.rand.org/pubs/occasional_papers/OP332.html

For more information on the author of this post, click here.

In Wilson v. State Farm, a ruling made June 14, 2011 in the USDC, WD KY, the court found an insurer did not act in bad faith in its refusal to pay a settlement while Medicare as Secondary Payer issues remain unresolved.    In summary, a settlement agreement was reached, the defendant wanted to resolve Medicare liens before paying the plaintiff and plaintiff's counsel refused to cooperate and would not let State Farm talk to Medicare. Instead he "asked State Farm to deposit the full policy limits in an escrow account from which the Medicare lien would be paid. Plaintiff agreed “to hold State Farm . . . harmless from any claim by Medicare.” Medicare was not involved in nor bound by this agreement. As an alternative, State Farm suggested including Medicare as a payee on the settlement check. Plaintiff rejected this request. Finally, State Farm decided to await Medicare’s determination of the value of its lien and then issue separate checks to Medicare and Plaintiff."

Plaintiff filed an action claiming "to delay payment of the $50,000 more than thirty days merely to protect Defendant from later liability to Medicare" was bad faith. Plaintiff ad a separate count under a KY statute that would allow for 12 percent interest and reasonable attorneys fees where an insurer failed to settle a claim without reasonable foundation. While the bad faith action was pending, State Farm learned the lien amount and paid the plaintiff and Medicare.  

The court found that " to comply with federal law and to protect its own legitimate interest against overpayment is reasonable and certainly is not in bad faith. Defendant did not delay payment in order to pay less or harass Plaintiff. Motorists Mut. Ins. Co., 996 S.W.2d at 452-453 (stating that “there must be proof or evidence supporting a reasonable inference that the purpose of the delay was to extort a more favorable settlement or to deceive the insured with respect to the applicable coverage”). While it may serve Defendant’s self interest to comply with federal law, such action was not bad faith, especially when Plaintiff apparently refused to cooperate with Defendant’s attempts to pay the claim more quickly."

The court also found that the delay was based on a " ' reasonable  foundation' " when the delay in payment of the settlement was to seek "assurances concerning the amount and payment of the lien."

This is a great ruling for companies who are struggling with resolving Medicare issues on settled cases, working under threat of suit for sanctions.

For more information on the author of this post, click here.