Home » 2007 » November

Monthly Archives: November 2007

Debunking a frivolous lawsuit myth

The annual Stella Awards, which lists the most extravagant lawsuits of the year, has recently made the rounds on the Internet and in in-boxes. However, this year’s top lawsuit was nothing more than popular urban myth, writes Houston Chronicle columnist Rick Casey. To view the article, click here.

Casey cautions the public to take stories like those enumerated in the Stella Awards with a grain of salt and notes that stories about most “frivolous” lawsuits are usually nonsense. His lesson that he hopes readers will take from his article: The next time an Internet tale makes you think things are even worse than you thought, check it out. Especially when the tale suggests that the American system is stacked against wealthy corporations.

One easy way is to visit Snopes.com, a site that investigates urban myths.

Wal-Mart and the evils of subrogation

One of the more frustrating aspects of the personal injury practice is explaining the concept of subrogation to clients. Last week, Wal-Mart insured that subrogation will continue to be an evil in the tort world.   The Wal-Mart’s, and those of their ilk, have cultivated a new breed of subrogationist — the catfish of the industry.

Subrogation is one of those “fine print” aspects of health insurance policies that gives insurers and employers a legal claim on a client’s recovery in a tort case. That is, the health insurer is able to get first dibs on any money paid before the injured person can recover for his/her personal loss. To make matters worse, the health insurers don’t care whether the injured person is made whole and refuse to contribute to attorney’s fees and costs incurred.

It is, indeed, one of the most blatant abuses of tort law by corporations, and the courts have refused to step in and put an end to this practice. As a result, many claimants not only suffer physical injuries, but they lose the right to recover fully by greedy insurance companies.

Last week, a federal appeals court in Missouri gave the green light to these egregious collection practices by health insurers. Last year, the Supreme Court in Sereboff v. Mid Atlantic Medical Services, ruled that a health plan could sue for recovery of settlement money held in a separate, identifiable fund under ERISA provisions allowing suits for “equitable relief.” As the Missouri case demonstrates, recoveries under subrogation clauses are anything but equitable.

Last week’s case involved a collision with a semi-trailer truck seven years ago that left 52-year-old Deborah Shank permanently brain-damaged and in a wheelchair. Her husband, Jim, and three sons found a small source of solace: a $700,000 accident settlement from the trucking company involved. After legal fees and other expenses, the remaining $417,000 was put in a special trust. It was to be used for Mrs. Shank’s care.

Instead, all of it is now slated to go to Mrs. Shank’s former employer, Wal-Mart Stores Inc. under a subrogation clause hidden in the plan that covered her medical bills. The details of the case were reported in the Wall Street Journal on November 20, 2007. The article can be viewed by clicking here.

The efforts by Wal-Mart have been condemned on many fronts. The LA Times has called the move legal, but wrong (click here to read that opinion piece). The folks at Wal-Mart Watch have called it moral bankruptcy (click here to read that opinion piece). The American Bar Association has warned that some people who are injured and receive a settlement or verdict are getting a big surprise: more litigation from the health plan that paid their benefits and now wants the money back.

The ABA also noted that insurers recover some $1 billion a year, according to the industry group, American Benefits Council and America’s Health Insurance Plans (See amicus brief filed by ABC, at p. 3, n. 3). A “cottage industry” of subrogation lawyers and benefit-recovery firms help companies go after the money.

It appears that unless Congress steps in, subrogation will be an obstacle that will prevent injured people from recovering, and pad the pocketbooks of greedy health insurers.

Blocking the courthouse door

By now you have heard of Stella Liebeck and the infamous and the case against McDonald’s that arose from a hot cup of coffee. That case and the myths that grew out of it have been fodder for tort reformers of all shapes and sizes. In case you have not heard, click here.

If you are interested in the truth, then you should spend some time with a book entitled Blocking The Courthouse Door: How the Republican Party and Its Corporate Allies are Taking Away Your Right to Sue written by Stephanie Mencimer (2006). Mencimer, an investigative reporter and contributing editor to the Washington Monthly, takes on tort reformers with an energetic “serve and volley” approach. The book provides some interesting history from the 1990’s and 2000’s on how tort reform was pushed through in Mississippi, Texas and elsewhere, including the attacks on the judiciary in both of those states. It also provides some details of the little-publicized exonerations of some of the Justices like Oliver Diaz of Mississippi and folks like attorney Paul Minor who were viciously attacked and prosecuted under criminal indictments, which had their chilling effect on political donations and gave a boost to legislative reform even though less publicized acquittals resulted from the trumped up charges.

Mencimer also writes a blog called The Tortellini which is a good source of news and analysis on the subject of tort reform and is a companion to the book. As Mencimer writes: “Tort reform has become a staple of Republican politics. Limits on lawsuits are offered as a solution to everything from the health care crisis and economic stagnation to America’s moral decline. Americans overwhelmingly believe that the nation is awash in frivolous lawsuits.”

And that’s just where Mencimer’s book and The Tortellini comes in. Much of what you’ve heard about tort reform is wrong and comes courtesy of a long disinformation campaign by the U.S. Chamber of Commerce and other big business sponsors like the tobacco, insurance and automobile industries. These folks have managed to convince voters from to Hawaii to Maine that plaintiffs in civil actions are whiners, hustlers, and malingerers, and that their attempts to win the “lawsuit lottery” have created a “litigation explosion.”

The truth is much more complex and you are urged to consult these sources to get a more balanced view.