Vested Interest - Tort Briefs - February 1999 Issue

California Jury Issues $116 HMO Liability Verdict

David Goodrich suffered from stomach cancer and needed high-dose chemotherapy to have any chance to survive. His HMO, Aetna U.S. Healthcare, refused to pay for the procedure. Goodrich died in 1995 as a result, but a jury in California has concluded that Aetna’s actions should cost the company $4.5 million in compensatories and an additional $112 million in punitives. Aetna has pledged to appeal, and observers believe the punitive portion will likely be reduced or eliminated, but Ron Pollack, director of Families USA, praised the jury for sending a signal to HMOs that they cannot deny care with impunity. (Reuters, January 21, 1999)

No Conflict Between RICO and McCarran: Supreme Court

The Supreme Court has ruled that HMOs can be liable under RICO for failing to disclose discounts to insureds. Humana Health Insurance of Nevada signed contracts calling for patients to pay 20% of the cost of treatment. The HMO then negotiated secret discounts with hospitals which were not shared with insurers, effectively raising patients’ share of the cost. Patients filed suit under the federal Racketeering Influenced and Corrupt Organizations Act (RICO), which Humana sought to block under McCarran, which reserves insurance regulation to the states. Justice Ruth Bader Ginsburg, for the majority, held that the RICO suit compliments, rather than frustrates, state regulation. (AP, January 20, 1999)

Pennsylvania High Court Strikes ERISA Exemption for HMO Liability

The Pennsylvania Supreme Court has ruled that a liability suit may proceed against a managed care entity despite the provisions of the federal ERISA. U.S. Healthcare, an HMO, had argued that the federal law blocked suits about delays in the provision of benefits. U.S. Healthcare postponed the transfer of a patient from one hospital to another. The delay, according to the underlying suit, resulted in permanent quadriplegia. While the Court did not rule on the merits of the underlying suit, its ruling to allow the suit to proceed was hailed as a victory by doctors and patients alike. (PRNewswire, January 14, 1999)

Supreme Court to Decide if Withheld Workers Comp Payments Violate Due Process

Pennsylvania’s workers comp law allows insurers to withhold payments while resolving disputes. Ten workers there filed suit, claiming that the insurers had violated the workers’ due process rights. They argued that, because workers compensation insurance is required under state law, comp insurers are acting as an arm of the government and are therefore bound by constitutional requirements. The case, American Manufacturers Mutual Insurance v Sullivan (97-2000), was dismissed at trial, and the appeal of that dismissal is now before the U.S. Supreme Court. (AP, January 19, 1999)

Dancer, Struck by Police Car, Secures $11 Million Settlement

Pedro Antonio Espinoza was crossing the street when he was struck by a police car in Los Angeles. He suffered a severe brain injury, leaving him unable to speak and bound to a hospital for the rest of his life. Espinoza, an acclaimed salsa dancer, now has hospital bills totaling $32,000 each month. The City of Los Angeles has approved a $11 million settlement, the largest settlement every paid by the city. “This is above what we would expect in a settlement but below what we could have gotten from a jury,” F.X. Sean O’Doherty, attorney for Espinoza, said. (AP, January 22, 1999)

Denny’s Again a Defendant in Discrimination Suit

The Denny’s restaurant chain has initiated a series of TV advertisements touting “diversity”, but one group of California patrons claims the chain discriminated against them because they are Hispanic. The suit claims that employees seated a group of 17 people, including 16 Hispanic people, then denied them service and had them ejected by the police, all the while seating and serving other patrons. The chain has paid over $50 million to settle other discrimination claims, and now requires employees to undergo sensitivity training. (AP, January 124, 1999)

Attorney Discipline on the Upswing

The Attorney Registration and Disciplinary Commission took action against 133 attorneys in 1998, second only to the record set in 1995. Most were disbarred or suspended from the practice of law. At the same time, the number of complaints against attorneys declined to the lowest point in the decade. The ARDC also paid over $250,000 to 74 victims of lawyer fraud, under the Client Protection Program, designed to make restitution in instances where lawyers abuse client funds. The ARDC and the Client Protection Program are funded entirely by fees levied on Illinois 74,000 licensed attorneys. (Press Release)

Warsaw Convention Limits Airline Liability: U.S. Supreme Court

The U.S. Supreme Court overturned a woman’s $5 million verdict against an airline on the grounds that the Warsaw Convention bars lawsuits against air carriers under local laws. Tsui Yuan Tseng sued El Al after the airline detained and searched her over a 4 hour period in 1993. The district court dismissed her suit for emotional damages, but the circuit reinstated, finding that Warsaw Convention did not specifically bar suits under local laws. The U.S. Supreme Court disagreed, finding that the treaty did not intend to “subject air carriers to the distinct, non-uniform liability rules of the individual signatory nations,” wrote Justice Ginsburg for the 8-1 majority. A subsequent treaty, the Montreal Protocol No. 4, clarified the Convention’s bar on local suits. (AP, January 12, 1999)

Women’s Softball Coach Settles Discrimination Suit for $1 million

Vicki Dugan spent three years as “interim” women’s softball coach at Oregon State University, making just $9,750 each year, while men’s coaches were making $32,000. She sued, citing the uneven allocation of resources between men’s and women’s athletics. She secured a 1997 jury verdict of $1.275 million, but the school appealed. Parties have now agreed to a settlement in which the school will pay her $623,000 in damages and another $460,000 in attorney’s fees. Dugan, who now coaches at the high school level, said, “win or lose, I knew I was doing what I had to do.” (AP, January 14, 1999)

School Harassment Suit Heads to Supreme Court

A 10-year-old girl sustained verbal and physical assaults from another student, and teachers and administrators refused to take action until she filed criminal charges, securing a guilty plea. Now she has the adults’ attention again, having filed a civil lawsuit against the school, alleging sexual harassment under Title IX. The 1972 law forbids schools receiving federal money to discriminate on the basis of gender. Plaintiffs allege the school district repeatedly and willfully ignored the girl’s pleas for help. A ruling is expected later this year. (AP, January 11, 1999)

Nevada High Court Upholds Implant Verdict Against Dow Chemical

The Supreme Court of Nevada has upheld a jury verdict holding Dow Chemical liable for injuries sustained by a woman who had Dow Corning breast implants. The 3-2 ruling affirmed a jury’s finding that Dow Chemical should pay plaintiff Charlotte Mahlum $4.2 million in compensatory damages for failing to ensure the safety of the silicone they sold to Dow Corning. A separate 4-1 ruling, however, eliminated the $14 million in punitive damages. Dow Chemical announced that they would ask the Nevada court to reconsider its ruling. (AP, January 1, 1999)

Plaintiffs Seek Prohibition, but Not Damages

Two class action suits filed in Arizona allege that the U.S. Border Patrol stops cars for inspection solely because the passengers appear to be Hispanic, without reasonable suspicion of illegal immigration. One suit is on behalf of Hispanics in the area and the other on behalf of drivers who are not Hispanic but are believed to be so. The suits, dismissed by the District Court but reinstated by the 9th Circuit, seek to prohibit stops without more substantial reason than the ethnicity of the passengers. Plaintiffs seek no monetary damages. (AP, January 13, 1999)