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Commercial Litigation Firm News

SettlePou Associate Takes Leave for Federal Judicial Clerkship

Kristina Kiik, a member of SettlePou’s Commercial Litigation Section, is on leave until September 2012.  She is serving as a judicial law clerk for the Honorable W. Royal Furgeson, Jr., Senior District Judge, U.S. District Court for the Northern District of Texas, Dallas division.

Kristina attended Southern Methodist University for both her undergraduate and legal education. She received a B.A. in Political Science, International Studies, and Public Policy in 2006, and was a 2010 cum laude law school graduate.  She was also the Casenote and Comment Editor for the SMU Law Review and a member of the Phi Delta Phi legal fraternity.

While federal law clerks have no statutorily defined duties, they regularly conduct legal research, prepare bench memoranda, draft orders and opinions, and confer with the judge on rulings.

Kristina looks forward to returning to SettlePou upon the completion of her clerkship.

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Firm News Insurance Defense

Update on Recent Insurance Law Decisions

There have been a number of recent court decisions which are of significance to the practice of insurance law. These include cases dealing with the duties to defend and to indemnify under a CGL policy, the Texas Tort Claims Act, and numerous healthcare claims, inter alia.

Always, each case involves different facts and law, and accordingly the following must be taken for general information purposes only, rather than for action upon any specific fact situation.

Insurance – Commercial General Liability – The Separate Duties to Defend and to Indemnify:

 In The Burlington Northern and Santa Fe Railway Company v. National Union Fire Insurance Company of Pittsburg, PA, 10-0064 (Tex. 2011), the Texas Supreme Court reversed a summary judgment in favor of the insurer because the Court of Appeals did not consider evidence extrinsic to the pleadings and insurance policy in determining whether the insurer owed a duty to indemnify. The Court of Appeals had determined that the insurer did not have a duty to defend under our “eight-corners rule” which requires a comparison of the allegations of the four corners of the petition with the four corners of the policy to see if a duty to defend arises, and had also held that there was no duty on the part of the insurer to indemnify the insured. 

The Supreme Court assumed, without deciding, that the Court of Appeals had correctly decided that the insurer owed no duty to defend, but the Supreme Court went further and held that the Court of Appeals nevertheless erred by not considering all the evidence presented by the parties when it determined the question of the insurer’s duty to indemnify the insured.  In other words, the gist of the Supreme Court’s decision is that unless the pleadings show that the policy’s contractual provisions and “other extrinsic evidence” cannot possibly bring the plaintiff’s claim within the policy’s coverage, then a court cannot find “no duty to indemnify” on the part of the insurer until that court has at some time in the future considered “all the evidence presented by the parties,” including all evidence extrinsic to the policy and pleadings which the parties might present.

Healthcare Liability Claims – Limitations – “Responsible Third Parties”:

 In Molinet vs. Kimbrell, M.D., 09-0544 (Tex. 2011) the Supreme Court dealt with a healthcare liability claim where the plaintiff sued one doctor, but did not sue two other doctors until after the additional two doctors had been designated as “responsible third parties” under Texas’ Proportionate Responsibility Act, which designation did not occur until after the two year statute of limitations of the Texas Medical Liability Act had expired. Although Texas’ Proportionate Responsibility Act allows a sixty day extension of limitations to bring suit against additional defendants designated as “responsible third parties,” the Texas Medical Liability Act has an “absolute” two year limitation period. Since the Medical Liability Act provides (i) that its two year limitation period applies “notwithstanding any other law” and (ii) that the Medical Liability Act applies in the event any of its provisions conflict with any other statute, the Supreme Court analyzed both statutes, held that the two year limitations of the Texas Medical Liability Act controlled, and that the plaintiff’s claims against the two new “responsible third party” doctor-defendants were barred.

Healthcare Liability Claims – Failure to Serve Statutorily Required Medical Authorization with 60 Day Notice of Claim:

 In Carreras, M.D., v. Marroquin, 09-0857 (Tex. 2011) a plaintiff gave the statutorily required Notice of Claim two days before the two year statute of limitations expired under Texas’ Medical Liability Act, but failed to accompany the Notice of Claim with the likewise statutorily required “Authorization Form for Release of Protected Health Information.” Noting that said statute provides in some situations for a sixty day abatement from the date when a medical authorization is in fact received, the Supreme Court analyzed the statute and its history, held that the requirement to provide the medical authorization form was mandatory, and ruled that a plaintiff’s failure to do so does not stop the running of the two year statute of limitations, thereby barring plaintiff’s claim.

Healthcare Liability Claims – Defective Equipment:

 In another healthcare case, Turtle Healthcare Group v. Linan, 09-0613 (Tex. 2011), the Supreme Court reiterated one of its recent decisions and again held that claims based upon medical equipment can not be brought separately as claims both subject to the Texas Medical Liability Act and as claims not subject thereto. In other words all such claims involving equipment utilized in medical care must be brought under the Texas Medical Liability Act, and if the requirements of that statute are not complied with, such claims must be dismissed. In this case the healthcare provider was negligent in delivering a defective ventilator, battery and battery box. The Court held that the healthcare plaintiffs could not divide their claims relating to “defective batteries” from their “non-battery” claims, and that all such claims were subject to the Texas Medical Liability Act.

Damages – Illegal Immigrant Status – Wrongful Death:

 In Republic Waste Services, LTD v. Martinez, 01-09-00236-CV (Tex. App. [1st District – Houston] 2011, no writ), our Houston Court of Appeals discussed the Trial Court’s exclusion from evidence of the  illegal immigrant status of plaintiff’s decedent, even though the deceased illegal immigrant’s status was arguably relevant to the amount of recovery for lost future earnings based upon U.S. wages, as opposed to Guatemalan wages, and held that the Trial Court’s exclusion of the evidence of the deceased illegal immigrant’s status fell within the Trial Court’s discretion and was not an abuse thereof, because the relevancy of such evidence was outweighed by the risk of substantial prejudice which would have been caused by the admission thereof.

Texas Tort Claims Act – Suits Against Government- Employees Individually:

 In Franka v. Velasquez, 07-0131 (Tex. 2011), the Supreme Court dealt with Section 101.106(f), Texas Tort Claims Act, which provides that a suit against a government employee acting within the general scope of his employment must be dismissed “if it could have been brought under this chapter against the governmental unit.” Noting that the Texas Tort Claims Act is not limited to encompass only tort claims for which the Act waives immunity against the State, the Supreme Court held that where a tort action is brought against an individual government employee in his individual capacity, such a claim is brought “under” the Texas Tort Claims Act even if the government has not waived its immunity for such actions, and such lawsuits against government employees in their individual capacities must be dismissed.

 By H. Norman Kinzy

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Business Counsel Services Firm News

Healthcare Reform Law Turns One

Where Are We Now?

 On March 23rd, 2011 the Patient Protection Affordable Care Act (“Act”) celebrated its first birthday. As a reminder, the Act provides a host of new legal requirements for health insurance reforms, and expansion of Federal and State healthcare authority.  Its intent is to improve the quality of care for and provide access to health insurance coverage to millions of Americans. 

Current Impact

 Since becoming law, the Act has done the following:  It fixed a “doughnut hole” for Medicare Part D; it added a high risk pool for those who couldn’t afford certain insurance; it allowed dependents to stay on their parents plan until the age of 26; and it provided for a small business tax credit. It also added language prohibiting insurers from blocking children from joining their parent’s plans if the child had a pre-existing condition. Finally, it added the first healthcare tax known as the “cosmetic tax.” This tax currently only taxes tanning services.

 In addition, beginning in 2011 the Medicare advantage rates are frozen at 2010 levels until the rates catchup to the current Medicare levels.  The Act has redefined medical expenses for FSA’s, HSA’s and HRA’s. Essentially, you can no longer purchase over-the-counter medicines and drugs without a prescription with these types of savings accounts.  Also added was the first market share tax on pharmaceutical companies. 

1099 Issue

The original act provided that starting in 2011, employers would need to start tracking any vendors that may purchase $600 or more of services and goods.  These vendors would receive a 1099 in 2012.  This provision has caused massive issues as it relates to how it would be implemented and whether or not there would be any exceptions to it.  The IRS moved implementation from 2011 to 2012. 

On March 3rd, the House passed a bill which aims to revoke and repeal the 1099 provision.  On April 5th, the Senate passed a measure repealing the 1099 provision.  The White House recently admitted “…that they were pleased that Congress has acted to correct the flaw that placed the unnecessary bookkeeping burden on small businesses….eliminating the 1099 reporting requirement as a right thing to do.”  As such, all parties agree that the repealed 1099 provision is best for the country as it would create a burden on small businesses that otherwise would not have been required.   However, the key sticking point is that Congress now needs to figure out how to offset the estimated $19-22 billion dollars in lost revenue the government would have received by requiring small businesses to file these new 1099 forms had it not been repealed.  This piece is still being worked out.

Accounting Care Organizations

It is also important to know that in 2012 certain primary care services will be treated and billed as accountable care organizations (“ACOs”).  In anticipation of the start date for the ACO’s, on March 31st, 2011, the government, through multiple entities, released guidelines for the ACO’s.  These proposed rules provide legal structures on how to develop ACO’s without violating fraud and abuse, anti-trust, tax and other legal implications.  The guidance issued also clarifies eligibility to participate, quality and privacy required. 

Congressional and Legal Challenges

 Clearly a lot has occurred since the signing of the Act.  However, uncertainty remains high as to the future of the Act, because multiple lawsuits have been filed in different venues ranging from Michigan to Florida, which challenge the constitutionality of the Act.  In some cases the courts have ruled in favor of the government while in other cases, like Virginia and Florida, the courts have ruled in favor of the plaintiffs. 

One such ruling was a ruling out of Florida which multiple states participated in, including Texas.  The Florida judge ruled the entire Act unconstitutional.  The government is appealing this decision to the local Circuit court.  In light of the different courts having different rules, the constitutionally issue will most likely be decided by the Supreme Court. 

In addition, with the Republicans in control of the House and the Democrats no longer a super majority in the Senate, other modifications to the Act are being negotiated.  With the Act just reaching its first birthday, many additional changes may occur this year.

Conclusion

Over the next 18 months there is a good chance the Act will continue to change as the 2012 elections approach.  Regardless of one’s political view regarding this healthcare reform, the Act a year later is still extremely controversial.  Most hope that the Act will not start showing signs of the “terrible twos” over the next 12 months.  Stay tuned…

By Bradford E. Adatto and Michael S. Byrd