Alaska Injury Law BlogAllstate has finally made public its controversial “McKinsey Documents” which describe the development of its self-described “radical” claims handling program. Allstate made these documents public just days after a Florida court affirmed an order from the Florida Division of Insurance prohibiting Allstate from writing any new business in that state until it produced those documents to the Division of Insurance there. Download file The Alaska Personal Injury Law Group already has a copy of many of the McKinsey Documents, having obtained a court order requiring Allstate to produce them in litigation pending in Alaska. From these documents and other sources, the Alaska Personal Injury Law group is familiar with Allstate’s self-described “radical” claims program designed by the international business consulting firm McKinsey & Company. According to Allstate records, this program has generated hundreds of millions of dollars in additional profit for Allstate’s shareholders and executives. The program, called Claims Core Process Redesign or “CCPR,” had three key components: (1) discouraging claimants from hiring attorneys because McKinsey’s extensive closed-claim study showed that represented claimants, even after adjusting for the same type of claim, were paid far more than unrepresented claimants; (2) arbitrarily and systematically depressing claim valuations through a centrally “tuned” claims evaluation computer program with the not-so-friendly name of “Colossus;” and (3) vigorously litigating against claimants who did not submit to Allstate’s new arbitrarily-lowered claim valuations (candidly called the “Boxing Gloves” treatment by McKinsey and Allstate, as contrasted with the “Good Hands” treatment given to claimants who agreed to Allstate’s valuations). For the last 10 years, Allstate has doggedly refused to produce the McKinsey Documents in cases alleging bad faith claims handling. In the few cases in which courts have ordered Allstate to produce the McKinsey Documents (like one currently being handled by the Alaska Personal Injury Law Group), the court imposed strict confidentially rules based on Allstate’s claim that the documents were allegedly important trade secrets. Allstate produced 12,929 pages of McKinsey Documents to the Alaska Personal Injury Law Group under protective order. The Alaska Injury Law Group is now looking forward to using these documents without the burdensome confidentiality restrictions previously advocated by Allstate.
Health Insurer Punished for Bad Faith Cancellation of Policy of Insured Undergoing Cancer Treatment
In an insurance bad faith case, a retired judge, sitting as an arbitrator, has found a willful scheme to cheat the insured and imposed punitive damages against a health insurer for post-claim underwriting. Post-claim underwriting is a scheme where an insurer facing a claim for benefits “investigates” the policy application and rescinds the policy on the ground that some important information was not disclosed by the insured. Post-claim underwriting is discussed in more detail in an earlier article by the Alaska Personal Injury Law Group.
In the case reported upon here, the insured incurred medical bills of more than $125,000 for breast cancer treatment. While she was still being treated, the health insurance company did its post-claim underwriting and cancelled her policy. The poor insured was left facing not only a life-threatening event, but also huge medical bills with no way to pay them.
The ultimate unfairness was that this policy had been sold to her to replace a policy that unquestionably would have covered these bills. She did not need this new, replacement policy but the insurance company’s agent sold it to her anyway. The most likely reasons were to generate new business for the company and a commission for himself. It was the insurance company’s own agent, not the insured, who had filled out the application that the insurance company later used to cancel the coverage. None of that caused the insurance company to hesitate in the least when it came time to save $125,000 by canceling the policy.
Insurers’ Bad Faith Post-Claim Underwriting Rejected by Court
Wouldn’t it be great if you could get paid for making a promise to do something in the future, but when the time came to keep your side of the bargain you could cancel the contract and not have to pay? The person you made the promises to might be upset at paying you for all those years for nothing, but you get free money! Ignoring the moral and ethical flaws with the scheme, it would be a great way to improve your financial position. Of course, that’s how insurance companies often operate these days. One tool they use is “post-claim underwriting.” It is a terrible, dishonest practice that reneges on the insurer’s promises when the insured most needs the benefits promised in the insurance policy.
What is post-claim underwriting? In its simplest form, an insurance company takes a cursory look at your application, sells you a policy, collects premiums until you make a claim, and then does an “investigation” to determine that they should not have sold you the policy in the first place. Instead of doing a true underwriting analysis before issuing the policy, the insurer waits until after you make a claim and then decides you tricked them into insuring you. The insurance company then rescinds the policy, claiming you misrepresented something or failed to disclose something on your application for the insurance.
From the insurer’s perspective, it’s the perfect scam. The insurer gets to collect premiums on a policy, but does not have to pay the benefits promised. Of course, it is also a bad faith practice, a flagrant breach of the covenant of good faith and fair dealing that is part of every insurance policy, and may be a crime. Unfortunately, those problems will not deter an insurer who cares more about its bottom line than for the rights and interests of its insureds.
Smilin’ Bob Ain’t Smilin’ No More: Herbal Company President Convicted
A federal jury today convicted the president of Berkeley Nutraceuticals, Steve Warshak, on charges of conspiracy to commit mail fraud, bank fraud, and money laundering. Warshak’s mother, Harriett Warshak, was also convicted. They now face more than 20 years in prison, and the company could be forced to forfeit tens of millions of dollars. Seven former company officials pled guilty to conspiracy charges before the trial began.
The company bilked thousands of customers out of millions of dollars using fake product warranties, fake medical spokesmen, and fake credit card transactions. The company’s main product, Enzyte, was advertised as a “natural male enhancement” and was hawked on TV ads by a constantly grinning character nicknamed Smiling Bob.
We suspect that Bob isn’t smiling anymore.
Diet Supplement Glucosamine No Better Than Placebo
Under the dubiously named Dietary Supplement Health and Education Act (DSHEA), diet supplements and herbal preparations are not approved by the Food and Drug Administration for medical use in humans. Thus, safety and formulation are solely the responsibility of the manufacturer; evidence of safety and efficacy is not required as long as they are not advertised as a treatment for a medical condition. As we have seen in diet supplement litigation (Talbert v. E’ola Products, Inc.), diet supplement manufacturers often promise the moon in selling their products to the consumer, while having little other than anecdotes to show when it comes to providing data for the safety or effectiveness of their products. Even assuming that the products are not adulterated (because of shoddy manufacturing protocols), have not been spiked (pharmaceutical drugs intentionally put into the supplement), and actually contain the ingredient at the levels claimed (often the “active” ingredient is missing or varies wildly), it is the exception, not the rule, that the manufacturer will have evidence that the supplement is safe for human consumption and actually works. With pharmaceutical drugs, the manufacturer foots the bill for such research. In the world of diet supplements, however, it is often independent researchers or the government (read: the taxpayer) that is burdened with the duty and cost of proving the safety and efficacy of a particular diet supplement.
At the Alaska Personal Injury Law Group, we are frequently asked to help those with serious orthopedic injuries. And our clients commonly face the debilitating consequences of arthritic changes that come from these injuries. So a discussion about glucosamine is in order. Luckily, unlike ephedra and other more dangerous diet supplements, glucosamine has not had a string of serious adverse events (it is not without side effects, however, so you need to read carefully before using glucosamine). But does it work?
Glucosamine is a natural compound that is found in healthy cartilage. Glucosamine sulfate is a normal constituent of glycoaminoglycans in cartilage matrix and synovial fluid (this is the “hydraulic” fluid in your joints). It is believed that the sulfate moiety provides clinical benefit in the synovial fluid by strengthening cartilage and aiding glycosaminoglycan synthesis. The question is, if you take the supplements, will the body put the critical compounds into your blood stream and use them where the arthritis lies? There have been multiple clinical trials of glucosamine as a medical therapy for osteoarthritis, but the results have been conflicting. Early clinical trials sponsored by a European patentholder, as expected, demonstrated a benefit from glucosamine. However, these studies were of poor quality due to shortcomings in their methods, including small size, short duration, poor analysis of drop-outs, and unclear procedures for blinding. Subsequent independent studies did not detect any benefit of glucosamine. This situation led the National Institutes of Health (yes, you the taxpayer) to fund a large, multicenter clinical trial studying reported pain in osteoarthritis of the knee, comparing groups treated with chondroitin sulfate, glucosamine, and the combination, as well as both placebo and celecoxib (Celebrex). The results of this 6-month trial found that patients taking glucosamine HCl, chondroitin sulfate, or a combination of the two had no statistically significant improvement in their symptoms compared to patients taking a placebo.
Alaska Personal Injury Law Group Attorney Selected By Benchmark:Litigation
Alaska Personal Injury Law Group member, Richard E. Vollertsen, has been selected for inclusion in the 2008 edition of America’s Leading Litigation Firms and Attorneys. Those selected are identified by Benchmark’s research team, which conducts extensive face-to-face and telephone interviews with the nation’s leading private practice lawyers and in-house counsel in the preceding 12 month period. The purpose of the ranking is to identify those firms and attorneys best able to handle complex litigation matters. The rankings include identification of “local litigation stars” for each state, reflecting only those individuals who were recommended consistently as incontrovertible stars by clients and peers. Mr. Vollertsen was identified in this ranking as a “local litigation star”.
The research results for law firms were also broken down into “highly recommended” and “recommended” categories. All listed firms were consistently mentioned by peers and clients, but the “highly recommended” firms received the most mentions, and were held up as being definitively dominant in their particular jurisdiction. Atkinson, Conway & Gagnon, Inc., of which the Alaska Personal Injury Law Group is a division, was identified as “highly recommended” in this ranking, as well. Atkinson, Conway & Gagnon, Inc. was one of only 3 firms in Alaska selected as “highly recommended.”
Source: Benchmark: Litigation, America’s Leading Litigation Firms and Attorneys, 2008, www.benchmarklitigation.com
Returning Soldiers: Advancing Medicine After Sacrifice In Battle
If the march of history has shown us anything, it is that technological advances are often the result of armed conflict. We have seen that in striking detail in the Iraq and Afghanistan conflicts. One of the most unfortunate consequences of these conflicts is that they have dramatically highlighted the armed services’ inability to effectively screen and treat traumatic brain injury (TBI) and post traumatic stress disorder (PTSD) in returning soldiers. Another consequence is that the fact that soldiers have suffered TBI and PTSD in ever increasing numbers has forced research forward concerning these intractable disorders. In recent weeks, several articles of note crossed our desks here at the Alaska Personal Injury Law Group.
The Government Accounting Office (GAO) just released a report that underscored the Dept. of Veteran’s Affairs’ (VA) continuing inability to identify and provide services to affected veterans. This is true despite a pledge by the VA Secretary, Jim Nicholson, last April to promote new screenings for brain injury and a personal promise to see the changes through. The GAO reviewed nine VA medical centers, and found that there were problems in securing follow-up appointments after the veterans initially tested positive under the VA’s TBI screening tool. Two of the medical centers did not follow the screening tools protocol because they failed to use the symptom checklist, which they said was because they didn’t know the checklist existed or because they had inadequate staffing. The GAO also identified poor rural access to services resulting in a 50% decrease in the ability to provide care. It is estimated that as many as 20% of US combat troops who fought in Iraq and Afghanistan are believed to leave with signs of TBI.
At the end of January, the New England Journal of Medicine published a study submitted by specialists at the Walter Reed Army Institute of Research that added further to the controversy about how veterans should be screened and treated upon their return. Studying outcomes for over 2500 soldiers, the researchers found that soldiers with mild traumatic brain injury, particularly those who had suffered loss of consciousness, were significantly more likely to report poor general health, missed workdays, medical visits, and a high number of somatic and post-concussive symptoms than were soldiers with other injuries. After the data was adjusted, the researchers concluded that mild traumatic brain injury with loss of consciousness was strongly associated with PTSD and depression. Over 43% of soldiers reporting TBI with loss of consciousness met criteria for PTSD, compared with 27% of those with the lesser brain injury from an altered mental status following their injury. TBI with loss of consciousness was also significantly associated with major depression. The difficulties the soldiers faced may therefore be more attributable to the result of intense psychiatric reactions to battlefield events, rather than a structural injury to the brain. This may be good news in that there are treatments for PTSD and depression, and very few medical treatments available to those who have suffered a structural injury to the brain.
Medical Research: How Can You Trust The Data If The Doctor Has Financial Ties To The Manufacturer?
When we represent clients at the Alaska Personal Injury Law Group, we do our homework. When serious injuries occur, we have to become experts ourselves in the particular medicine being used to treat our clients. We thus comb through and rely extensively on medical literature in virtually every case we handle. We use it in our work with the medical experts we engage to help our clients, and we also share it with our clients.
And whether you realize it or not, you rely on medical literature every time you see a doctor or take any medication. This is because the engine of medicine runs on the data from medical literature. That data is what the FDA uses to decide whether to allow a medication or medical device to be sold, and what your doctor relies on to decide if a treatment, medical device, or medication will help you. Extraordinary rules and guidelines are put in place to make sure that the scientific findings in a particular study are objective and scientifically verified.
So it is always shocking when we learn that a manufacturer has taken liberties with the research data to make it appear that their product works when it really doesn’t. (We saw this repeatedly in the litigation against diet supplement manufacturers: Talbert v. E’ola Products, Inc.) We know why this happens: millions and sometimes billions of dollars are made by manufacturers in these endeavors, and greed can be a powerful motivator. Every time we learn about one of these situations, it reaffirms the need to vigilantly enforce the principles that guide regulators and researchers who develop research data. Western medicine is so profoundly effective because it is “evidence-based medicine”. If we allow clinical researchers to get into bed with the manufacturers, how can we trust that the research data they create for the manufacturers is valid, objective and truly “evidence-based”?
Institutional Bad Faith 101 — How Allstate’s DOLF Program Works
We recently reported on the CNN study that found insurers like Allstate and State Farm have systematic programs to force their insureds to settle for less insurance proceeds than the insurance company promised them in their insurance policies. CNN concluded that these programs have resulted in billions of dollars of excess profits for insurance companies. Allstate alone has given $23 billion of profits to its shareholders in only twelve years of using such a program.
How do those programs work? Let’s look at Allstate’s program, which it calls DOLF — Defense of Litigated Files. Allstate makes the insured a lowball offer. If the insured refuses to settle for less than the insurance benefits she bought, the claim will be litigated. In fact, Allstate will send a letter telling the insured that this is the only offer they are going to get and that, if the lowball offer is not accepted, Allstate will vigorously litigate the claim. So, instead of the insurance benefits she paid for, the injured insured is threatened with years of litigation to get what she was promised and deserves.
There is a theoretical possibility that Allstate will increase its offer, but only if the insured provides documentation of some “value changing event.” An example would be a doctor’s report that the insured needs surgery. But even if there is a significant change, the system is tilted against you. In one case, Allstate representatives testified at trial that new information about a significant value changing event did not go back to the original adjuster. Instead, it went from the Allstate defense lawyer to the “gatekeeper” in the Allstate claim office. The gatekeeper decided the adjuster did not need to know about the new information. That made it impossible for the adjuster to reevaluate the claim on the basis of the new evidence. Such a reevaluation was required by the insurer’s duty of good faith and by state claim handling regulations.
Health Insurer Pushes Itself Into Doctors’ Exam Rooms
We at the Alaska Personal Injury Group have seen it again and again with insurers, and have documented the practices in this blog: insurers mercilessly attempting to reduce costs by withholding policy benefits owed to policyholders, all the while justifying outlandish premium rate hikes by claiming that costs are too high. As insureds, we have almost become jaded to the extraordinary level of intrusion by insurers into our personal lives as they wage this campaign. For example, we think nothing of having to wrestle with an insurer who challenges our physician’s prescription for medication-the insurer intrudes into our relationships with our physicians as if it belongs in the room with us and our physician, challenging the physician’s choice of medication, the length of prescription, and even whether we should have the medication at all.
One of the most outrageous moves by health insurers yet is a letter Blue Cross of California recently sent to physicians asking them to “rat out” (my wording) their patients who might have preexisting medical conditions, which, of course, would then allow Blue Cross to cancel the patient’s coverage for the treatment sought from the physician. WellPoint, Inc., the Indianapolis-based company that owns Blue Cross of California justified the move because it was (and where have we heard this before?) trying to hold down costs. This is apparently a justification for intruding upon one of the most sacred of relationships, that of physician and patient.
Blue Cross is actually forwarding to the physician the patient’s insurance application (!) along with the letter instructing that:”Any condition not listed on the application that is discovered to be pre-existing should be reported to Blue Cross immediately.” To its credit, the California Medical Association contacted California insurance regulators immediately, explaining that the maneuver by Blue Cross was “deeply disturbing, unlawful, and interferes with the physician-patient relationship.”