1-206-467-5444 info@letherlaw.com

Washington State Supreme Court Clarifies Law on “Reasonable Investigation” and Determination of “Reasonable” Charges for Personal Injury Protection Claims

by | Feb 16, 2024 | Decisions, Events, Featured, Insurance Law, Misc., News & Updates, Professional Liability & Significant Injury Claims

On February 15, 2024, the Washington State Supreme Court issued its decision in Schiff v. Liberty Mutual Fire Insurance Company, et al., Case No. 101576-3, which examined “… what an insurer must do to meet the ‘reasonable investigation’ requirement and the requirement to pay ‘all reasonable and necessary’ medical expenses” under Washington’s Personal Injury Protection (“PIP”) statutes and Washington law.

The decision arose out of a suit filed by Dr. Stann Schiff alleging that the insurers’ practice of reducing provider bills based on computer-generated calculations violated Washington law.  It was undisputed that Liberty Mutual Fire Insurance Company and Liberty Mutual Insurance Company (collectively “Liberty”), used a third-party database called FAIR Health to determine reasonableness of a medical provides charges when Liberty received medical bills from an insured under either a PIP or a MedPay (supplemental medical payment coverage) claim. [1]

The trial court denied both parties’ attempts at summary judgment and the Court of Appeals accepted discretionary review. The Court of Appeal, relying on its prior holding in Folweiler Chiropractic, P.S. v. American Family Insurance Co, 5 Wn. App. 2d 829, 429 P.3d 813 (2018) reversed the trial court’s denial of Dr. Schiff’s motion. The Court of Appeals reasoned, based on the Folweiler decision, that: 1) it was an unfair practice under the Washington Consumer Protection Act (“CPA”) to not conduct an individualized assessment of a medical bill; and that 2) RCW 48.22.095(1)(a) and RCW 4.22.005(7) required an individualized assessment.

The database provided information for an insurer to compare charges for specific medical treatments in a geographical area and to determine the percentiles of those charges.  Liberty apparently had an established practice of paying 100% of a medical provider’s bill if it was below the 80th percentile for the procedure/treatment in the geographical area. However, if the bill exceeded the 80th percentile, Liberty would reduce the charges to the 80th percentile charge and pay that amount. It was undisputed that Liberty did not conduct individualized investigations with respect to the bills at issue, but instead relied upon 80th percentile information from the database.

The trial court denied both parties’ attempts at summary judgment and the Court of Appeals accepted discretionary review. The Court of Appeal, relying on its prior holding in Folweiler Chiropractic, P.S. v. American Family Insurance Co, 5 Wn. App. 2d 829, 429 P.3d 813 (2018) reversed the trial court’s denial of Dr. Schiff’s motion. The Court of Appeals reasoned, based on the Folweiler decision, that: 1) it was an unfair practice under the Washington Consumer Protection Act (“CPA”) to not conduct an individualized assessment of a medical bill; and that 2) RCW 48.22.095(1)(a) and RCW 4.22.005(7) required an individualized assessment.

The Supreme Court rejected the Court of Appeals’ analysis and overturned the Court of Appeals. In doing so, the Supreme Court effectively also overturned the Folweiler decision’s individualized assessment requirement. In discussing the Folweiler decision, the Supreme Court stated and held as follows:

Though the Court of Appeals cited to the relevant statutes and regulations, it failed to explain how they mandate an inquiry into the qualifications of the medical provider and did not cite any case to bolster its interpretation. The PIP statutes and the insurance code do not have any express requirement that the insurers look specifically at the qualifications of a medical provider to determine the reasonableness of the charge.

Schiff Opinion at 12 (emphasis added).

Instead, the Supreme Court held that the insurance code: 1) places the responsibility on an insurer to determine whether to deny, limit, or terminate medical benefits if the insurer determines the claim is not reasonable or necessary; 2) that the code tasks insurers to conduct their own reasonable investigation; 2) that the code requires insurers to create their own reasonable standards for promptly investigating a claim.

After reviewing the Washington Administrative Code (“WAC”) and the properties of the FAIR Health database, the Supreme Court held that “Comparing charges for the same treatment in the same geographic area is relevant to the determination of reasonableness.” Schiff Opinion at 14.

As a result of this conclusion, and in light of out-of-state authority addressing the same issues, the Supreme Court ultimately held in favor of Liberty as follows:

We hold that the 80th percentile practice and the use of the FAIR Health database is not unfair or unreasonable and does not violate the CPA or the PIP requirements to establish standards under which reasonable charges for medical procedures are determined.

Schiff Opinion at 16.

The Schiff decision effectively overturns the Folweiler decision and provides insurers with further clarity on their investigatory obligations and reasonableness determinations in PIP matters.  Insurers remain responsible for determining whether to deny, limit or terminate medical benefits where the insurer determines treatment was not reasonable or necessary. Insurers are also still required to conduct a reasonable investigation and develop reasonable standards to promptly investigate claims.

As the Schiff decision makes clear, insurers can safely continue to rely on databases such as the FAIR Health database to determine whether a provider’s charges are reasonable and are not required to individually investigate and vet each provider when making that determination as part of that process.

The attorneys at Lether Law Group have in excess of thirty-one years’ experience in defending and advising insurers on the handling of PIP claims. This experience includes handling claims and litigating insurance disputes in the state of Washington. Please do not hesitate to contact our office if you have any questions regarding the Schiff decision or any other insurance matter.

[1] The FAIR Health database was identified as an “independent, nonprofit, medical claim database.”

Oregon Supreme Court Unilaterally Creates “Negligence” Cause of Action Against Insurers

by | Jan 5, 2024 | Decisions, Dispute Resolution, Events, Featured, Insurance Law, Misc., News & Updates, Professional Liability & Significant Injury Claims

On December 29, 2023, the Oregon Supreme Court effectively created new bad faith liability exposure for insurers doing business in Oregon when it issued its opinion in Moody v. Or. Cmty. Credit Union, 371 Ore. 772, 2023 Ore. LEXIS 692 (2023). In Moody, an insured sued a life insurance company for breach of contract and negligence based on a denial of a claim for life insurance proceeds.

The Plaintiff’s husband was the named insured under a life insurance policy and was accidently shot and killed. At the time of his death, the decedent had marijuana in his system. The Plaintiff filed a claim, and the defendant insurer initially denied the claim because the decedent’s death purportedly fell within an exclusion for deaths caused by or resulting from being under the influence of a narcotic or other drug.

The Plaintiff brought suit alleging that the death was not caused by or resulting from the use of any drug. She alleged claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and negligence. Plaintiff sought both economic and non-economic damages including emotional distress damages. The extra-contractual claims were dismissed by the trial court and proceeded to an appeal. The Court of Appeals reversed the trial court’s dismissal of the negligence claim and the Supreme Court accepted direct review.

On review, the Supreme Court framed the primary question as whether the Plaintiff could pursue a negligence per se claim. The Court clarified that, in Oregon, a negligence per se claim is shorthand for a negligence claim that otherwise exists where the standard of care is set forth in a statute or rule and violation of the statute or rules raises a presumption of negligence.

Under that framework, the Court first examined whether the Plaintiff had a legally protected interest sufficient to subject the Defendant to liability for emotional distress damages. In determining that she did, the Court examined ORS 746.230 (Oregon’s Unfair Claim Settlement Practices statute). While acknowledging that the statute did not create an independent cause of action, the Supreme Court nevertheless found as follows:

We find that the statue provides explicit notice to insurers of the conduct that is required and, in requiring insurers to conduct reasonable investigations and to settle claims when liability becomes reasonably clear, does so in terms that are consistent with the standard of care applicable in common claw negligence cases.

Moody, 2023 Ore. LEXIS 692 at *41.

The Court went on to hold that permitting a common law negligence claim could further the statute’s purpose by deterring insurers from engaging in prohibited conduct. The Court went on to find that allowing emotional distress damages would not place an undue burden on the Defendant because insurers are in a relationship of mutual expectations with insureds and that the insurer could reasonably foresee that failing to exercise reasonable care in the handling of the relationship could result in emotional harm. Finally, the Court held that the claimed harm was of sufficient importance under public policy to justify allowing the claim to proceed. The Court’s ultimate conclusion was stated as follows:

Considering all of those factors, and not relying on any one of them alone, we conclude that the insurance claim practices that ORS 476.230 requires and the emotional harm that may foreseeably occur if that statute is violated are sufficiently weighty to merit imposition of common-law negligence and recovery of emotional distress damages.

Moody, 2023 Ore. LEXIS 692 at *51.

While the Court cautioned that its conclusion would not make every contracting party liable for negligence that causes emotional harm, the holding is extremely concerning and problematic for insurers. In fact, the holding may effectively overturn long-standing Oregon case law holding that insurers are not liable in tort for the handling of an insurance claim. See, e.g., Farris v. U.S. Fid. and Guar. Co., 284 Ore. 453, 587 P.2d 1015 (1978) (Farris II). This issue was recognized in the Moody dissent as follows:

The majority’s analysis creates uncertainty about the remaining precedential effect of Farris II. If the majority means to distinguish Farris II on its facts, then courts may still rely on Farris II as rejecting tort liability for third-party insurers that have denied coverage in bad faith, which were the facts presented in that case. On the Other hand, if the majority is distinguishing Farris II based on the pleadings or based on the legal theory that the plaintiffs asserted in that case, then Farris II might have no precedential effect in any case styled as a negligence claim.

Moody, 2023 Ore. LEXIS 692 at *78 n.7.

The full nature and impact of the Moody decision will likely remain unknown until the Oregon Supreme Court has had the opportunity to further clarify or refine its holding in subsequent cases. As it stands, insurers in Oregon now potentially face liability for general damages (and potentially other alleged consequential damages) in tort as long as those claims are styled as negligence claims. Effectively, the Oregon Supreme Court has created bad faith liability for insurers based on a negligence standard of proof. This reflects a substantial increase in exposure for insurers doing business in Oregon especially when one considers that the majority of jurisdictions require a higher burden of proof for bad faith claims (i.e. unreasonable, frivolous, or unfounded denial of benefits).

The attorneys at Lether Law Group have in excess of thirty-one years’ experience in advising insurers on the handling of extra-contractual claims. This experience includes handling claims and litigating insurance disputes in the state of Oregon. We have several attorneys licensed in Oregon and actively litigating coverage and extra-contractual claims in that jurisdiction. Please do not hesitate to contact our office if you have any questions regarding the Moody decision or any other insurance matter.

 

Logo for Letber Law Group

Lether Law Group Hosts the 2023 IAPL Annual General Meeting in Washington D.C.

by | Nov 15, 2023 | Events, Featured, Misc., News & Updates

The International Association of Practicing Lawyers (IAPL) is a select group of attorneys representing countries throughout the world.

For several years, Tom Lether has been the representative of the United States at the semiannual meetings. The IAPL presents an excellent networking opportunity for lawyers from multiple countries. More importantly, it provides an opportunity for lawyers with different cultural, religious, and geographic backgrounds to come together and discover that they all have common interests and goals. The ability to learn about legal systems around the world and exchange information in a collegial fashion with other lawyers provides incredible insight into international law.

In addition, the IAPL has become a true family of lawyers. Bonding over dinner, discussing history, politics, and legal systems in various parts of the world is an incredible experience.

This year’s 2023 IAPL annual general meeting was hosted by Lether Law Group in Washington, DC. It is the first time the IAPL has held their annual meeting in the United States for a number of years.

Washington, D.C. was a perfect setting for the IAPL. Members had an opportunity to bond over long walks to and from Georgetown, enjoy fantastic meals, experience an excellent guided tour throughout the major sites of Washington, D.C., and take a trip to the inner sanctum of the United States Supreme Court. Along the way, there were day visits to places like Alexandria and Arlington National Cemetery.

This year’s keynote speaker, Tom Lether, presented a seminar on the American legal and governmental systems, with a specific focus on the history of the debate between states’ rights advocates and those in favor of a centralized Federal Government. This presentation also discussed the never-ending dispute over how to interpret the Constitution.

This speech was presented in the context of American history and the American Civil War. Along the way, members were introduced to how these legal concepts have recently impacted the Supreme Court’s decisions in cases like the Dobbs v. Jackson decision that was cited in our newsletter.

Tom’s presentation sparked a lengthy discussion among the members about American politics and history, which underscored the importance of the IAPL organization. A link to a written version of Tom’s speech is below:

"The Gathering Storm"

For anyone interested in the IAPL, we also invite them to follow the link below to learn more about this truly fantastic organization:

IAPL Webpage

Business Interruption Claims Resulting from Wildfire Losses: What You Need to Know

by | Sep 8, 2023 | Featured, Natural Disaster Claims, News & Updates

As a result of the recent Lahaina wildfires occurring in Maui, Hawaiʻi, the question of what is covered under commercial property policies for business interruption claims has resurfaced.

Under most commercial policies, business interruption coverage is available to an insured whose business is closed as a result of a covered loss. Unfortunately, most policies require there to be direct physical loss or damage resulting in the closure of the business. For example, a fire destroying all or part of the business making it impossible for the business owner to operate.

During the Covid pandemic, hundreds of thousands of businesses around the world were closed due to governmental orders requiring businesses to shut down. As a result, billions of dollars arose from thousands of claims for business interruption coverage associated with these shutdowns.

Obviously, in the Covid context, businesses were shut down not necessarily as a result of direct physical damage, but rather by governmental order. As a result, coverage litigation ensued not only in the United States, but on a global basis in regard to these claims. Specifically, these Covid based lawsuits involved whether business interruption claims are viable as a result of a Covid governmental shutdown order. The vast majority of decisions worldwide found that there was no coverage for such shutdowns. Many insurance policies included business interruption coverage for closures resulting from governmental orders. Once again, however, most decisions from around the United States found that the governmental order had to be based upon a direct physical loss or damage to an adjoining property. Unfortunately, this resulted in there being no coverage. In addition, the final issue involved coverage for a partial suspension opposed to full suspension of the business. Specifically, certain commercial business policies provide coverage for a partial suspension. In other words, if the business is only partially suspended, there may be coverage available.

In regard to the Lahaina wildfires, a significant number of commercial buildings have been damaged or destroyed. In these situations, a business owner should have coverage for their business losses. Specifically, there is likely direct physical damage to the building. If the shutdown of the business is unrelated to a governmental order, the insurers will determine the amount of business interruption coverage owed based upon the income earned by the business and continuing expenses. Such claims are typically ascertainable through a review of a business’s financial records.

A more complicated issue involves how much time an insured may have to recover for business interruption. This is called the period of restoration. In other words, how long should it take for the business to be restored? In some policies, the period of restoration is defined as the shortest time necessary for a business owner to repair or relocate the business. However, there may also be a limitation as to the amount of time a business owner can collect on a business owner merchant claim. This is oftentimes limited to one or two years. In light of the very real possibility that restoration regarding the Lahaina wildfires will take more than two years, there is a significant potential for a number of business owners to find themselves in a situation where they will not have adequate business interruption coverage.

Even if the building has not been destroyed, an insured can still submit a claim for business interruption. For example, there are a number of businesses that have minor damage or that foreclosed as a result of governmental orders restricting access to the burn zone. To the extent there is any minor damage, there is still potential for coverage. By way of example, if there is smoke damage or exposure to hazardous materials, that type of damage may be sufficient to qualify as a direct physical loss or damage.

Moreover, if there is no damage whatsoever, the question will be whether the policy provides coverage for governmental shut down. Typically, in these instances the policy will say the insurer will provide coverage if there is damage to adjoining properties such that a local or state government has restricted access to the insured’s property. For example, if a neighboring building burns down and the insured’s business cannot reopen due to the business’s street being closed, there will be coverage. Accordingly, even though the insured’s building is arguably not damaged, there may still be coverage if the policy does provide coverage for the governmental order.

As a result of the above, here is what a business owner needs to know:

    • How long will my policy pay for business interruption?
    • What type of coverage do I have?
    • Do I have Governmental Order type coverage?

As always, if you have any questions regarding your insurance policy or any of the information provided above, please feel free to reach out to our office. Lether Law Group proudly employs attorneys who are born and raised on the islands of Maui, Oahu, and the Big Island. We are more than happy to provide you with guidance on understanding your specific policy coverages.

 

Hawaiʻi Wildfires: Understanding your Property Insurance Coverage

by | Aug 28, 2023 | Featured, Natural Disaster Claims, News & Updates

In light of the recent wildfires that have wreaked havoc across Hawaiʻi, Lether Law Group has received numerous inquiries from individuals seeking basic information on property insurance. The PDF  below will provide you with basic facts regarding homeowners, commercial, and rental insurance policies.

As a service to our Maui Ohana, we are providing this free information without any obligations. We are here to help you. If you do require formal legal assistance, please feel free to contact us.

Download PDF

Hawaiʻi Wildfires and FEMA Assistance: A Guide from Lether Law Group

by | Aug 28, 2023 | Featured, Natural Disaster Claims, News & Updates

In light of the recent wildfires that have wreaked havoc across Hawaiʻi, Lether Law Group has received numerous inquiries from individuals, government agencies, and families seeking guidance on accessing/locating support. This guide is designed to address those questions by detailing the process to obtain assistance from the Federal Emergency Management Agency (FEMA). Given the high demand for such aid, it is imperative for applicants to be well-informed about the process and eligibility criteria. Being prepared with the necessary information streamline your application and secure the assistance you need mor efficiently.

What is FEMA?

The Federal Emergency Management Agency, or FEMA, is a vital resource for citizens and emergency personnel across the nation. Its mission is to prepare for, protect against, respond to, recover from, and mitigate all hazards, including wildfires. If you’ve suffered losses that are not covered by your insurance, FEMA may provide reimbursement.

Am I Eligible for FEMA Assistance?

Becoming eligible for FEMA assistance requires satisfying specific criteria:

    • Identity Verification: You must be a United States citizen, non-citizen national, or qualified non-citizen and have a valid Social Security Number.
    • Insurance Examination: It’s essential to understand that FEMA will not cover disaster-related needs if they are already covered by insurance or other programs.
    • Ownership or Occupancy Verification: You must confirm that the disaster-damaged home is your primary residence.

How Do I Apply for FEMA Assistance?

Applying for FEMA assistance is a process that takes approximately 20 minutes. Here’s how to get started:

  1. Prepare your Information: Gather your Social Security Number, annual household income, contact details, insurance information, and bank account details where the financial assistance will be deposited.
  2. Contact your Insurance Company: It’s advisable to speak with your insurance company to confirm your insurer and policy information. For more information on insurance documentation, click here
  3. Begin the Application: Start your application online at DisasterAssistance.gov OR use the FEMA mobile app.  If you need assistance with the application, call FEMA at 800-621-3362 (open 24 hours aday/7 days a week – Multilingual operators are available)
  4. Submit and Track your Claim: Once your claim is submitted, you can follow the provided instructions to track its status.

How Lether Law Can Help

Lether Law Group has specialized in large first-party property losses for over 35 years, including multiple large fire loss and wildfire claims. Thomas Lether is approved as a FEMA Regional Counsel and has experience in significant natural disaster claims.

If you have any additional questions regarding your insurance policy or any of the information provided above, please feel free to reach out to our office. Lether Law Group proudly employs attorneys who are born and raised on the islands of Maui, Oahu, and the Big Island. We are more than happy to provide you with guidance on understanding your specific policy coverages.