WHAT
MANAGED CARE PLANS NEED TO KNOW ABOUT LAWSUITS
Health insurers
and health plans have weathered the storms of litigation brought by insured and plan
members over the denial of benefits for decades. However, many managed care plans,
integrated delivery systems, provider service organizations, and other new entities
involved in the financing and delivery for health care services are relatively
inexperienced in the area of litigation, in part due to the prevalence of widespread
immunity from lawsuits under federal law known as ERISA. However, given the nationwide
trend toward breaching this wall of immunity with new legal theories plus the development
of federal legislation allowing for lawsuits in denial of benefit cases, it seems likely
that managed care plans will be faced with many more lawsuits in the future.
This article
will discuss what managed care plans need to know about handling and defending managed
care liability and HMO malpractice lawsuits from the beginning and through to the date of
the start of the trial.
1.
RECEIPT OF NOTICE OF THE LAWSUIT
Managed care
plans should receive notice of a lawsuit by the personal delivery of the lawsuit to the
agent for service of process as designated by the plan with the appropriate state
regulatory authority. However, lawsuits are often improperly delivered or mailed to
employees of the plan. In such cases, employees must be instructed to immediately forward
the lawsuit to those individuals in the plan responsible for handling legal matters.
Regardless of
how the lawsuit is delivered, legal counsel experienced in handling and trying these kinds
of cases must be immediately retained and advised of the lawsuit. Counsel can examine the
method of legal service to determine if the plan has been properly notified of the
lawsuit.
Notification to
counsel must occur as soon as possible because plans usually have only thirty days from
the date the lawsuit was served on the plan to file with the court a legal pleading
responsive to the lawsuit. If the plan is able to take full advantage of federal law which
limits the potential monetary exposure of plans to lawsuits, counsel has only twenty days
from the date of service to file the appropriate legal pleading to have a federal court
adjudicate the matter.
Furthermore,
managed care plans can be subject to hearings for preliminary injunctions on very short
notice if the plan member faces immediate irreparable harm created by decisions by the
managed care plan. The entire litigation could be compressed into a few short weeks in
such situations. In these cases, a delay of even a day could be fatal to the defense of
the plan.
2.
POTENTIAL INSURANCE COVERAGE FOR LAWSUITS
If there is
possible insurance coverage for the lawsuit, the insurer must be notified immediately.
Even if an insurance policy will cover payments for a settlement or judgment against the
plan, the policy may obligate the insurer to pay for legal fees and costs incurred in
defending the plan from the lawsuit.
Since the law
generally does not obligate an insurer to pay for defense costs incurred prior to when the
insurer was told of the lawsuit, it is important to provide notice of the lawsuit to the
insurer as soon as possible.
If there is a
question as to whether an insurer should be notified of the lawsuit, that question should
be referred to legal counsel who is experienced in insurance coverage matters. Generally,
if there is a question as to whether a particular insurer should be notified, notification
should be given since there is often no disadvantage to providing an insurer with
notification that its insured has been sued.
The insurance
policy may have a deductible or a specified amount in legal fees and indemnity costs which
is initially borne by the plan. Those amounts should be ascertained by the plan which will
assist it in determining whether and at what point a case should be settled.
3.
WORKING WITH LEGAL COUNSEL
An individual
within the plan must be identified and tasked with responsibility for acting as the
contact between the plan and its attorneys. The primary responsibility of this individual
will be to obtain whatever documents are needed from the plan to defend it in court, and
to coordinate defense efforts between the plan and their attorneys.
4.
DOCUMENT RETRIEVAL AND STORAGE
Any and all
documents which may be relevant to any claims or preauthorization dispute must be
retrieved and safely stored in the same order in which the documents were kept originally.
Relevant data transferred to microfilm or contained in electronic form should be retrieved
in hard copy form and safety stored as well. If there is any question as to whether a
document is relevant to the lawsuit, the document should be retrieved and stored so that
legal counsel can determine whether the document is relevant.
Document
destruction policies should be examined to insure that potentially relevant documents are
not accidentally destroyed. Accidental destruction may result in the loss of excupatory
evidence or in an argument by opposing counsel that the destruction of relevant documents
is evidence of guilt.
An exact
duplicate copy of the relevant documents should then be provided to legal counsel who may
separately number each document for identification.
Identification
and retention of relevant documents may apply to the creation of medical policies if such
policies are relevant to the dispute at issue. Accordingly, identification and retention
of documents surrounding the creation of relevant medical policies may be necessary.
5.
IDENTIFICATION OF POTENTIAL WITNESSES
Any and all
persons involved in the decision to deny benefits or authorization for services must be
identified and their identities, current job title, job title at the time of the events
identified in the lawsuit, and their current job address should be immediately provided to
counsel. Persons who are potential witnesses should be admonished to cease any discussions
with anyone about the issues in the lawsuit since such the opposing party may learn about
such communications. Those parties to such discussions may be subject to deposition as
well.
The last known
address and telephone number of potential witnesses who are no longer employed with the
plan should also be provided to counsel, as well as any potentially relevant information
regarding their termination of employment from the plan.
If the dispute
involves a plan’s medical policy, those involved in the creation of the medical
policy may be potential witnesses who need to be identified for counsel as well.
Potential
witnesses with the plan need to be advised that their cooperation will be needed in the
event an interview by counsel or deposition testimony is needed.
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