3rd Circuit green-lights RICO suit v. First Unum
I-Pals,
Before we get to the big news out of the Third Judicial Circuit, in Philadelphia, I’d like to squeeze in this story:
U.S Study Finds Majority of Medical Malpractice Claims Close Without Payment.
It describes a new study by the DOJ’s Bureau of Justice Statistics that supports a growing suspicion around ITP HQ that there is much less than meets the eye to the med mal crisis often described by my pals at American Tort Reform Association and the Insurance Information Institute. This is the alleged crisis in which reckless plaintiffs lawyers gull “runaway juries” sitting in “judicial hellholes” into bankrupting insurers over meritless claims, and forcing them to charge premiums for some doctors of up to $200,000 a year — wrecking havoc on the health-care system, driving doctors out of surgical and OB-GYN specialties, requiring tort reform and caps on punitive damages, etc. It turns out there aren’t that many claims and most result in zero payments.
The study appears to support Prof. Tom Baker at U Conn.’s Insurance Law Center and his tremendous book, The Medical Malpractice Myth, a bargain at $22.50 hardbound, and now in paperback at $14 (poverty is no longer an excuse). ITP understands that the book is now being made into a major motion picture starring John Malkovich(1).
As the blub says:
“Are there too many medical malpractice suits? No, according to Baker; there is actually a great deal more medical malpractice, with only a fraction of the cases ever seeing the inside of a courtroom.”
The BJS Med Mal Study (pdf), also on ITP’s key documents page, studied seven states from 2000 to 2004 and found that of the fraction of medical accidents that actually wind up in court in Illinois, for instance, only 12% of those result in any payment at all, with only a few cases resulted payments of $1 million or more, generally instances in which the medical provider “engaged in reckless or criminal behavior.”
So why tort reform?
Ok, le tout monde d’assurance is abuzz with the April 3 Third Circuit decision that allows policyholders to sue insurers for fraud under the civil Racketeer-Influenced and Corrupt Organizations law, significant because it allows policyholders to bring a powerful federal law to bear despite McCarran-Ferguson, the 1945 federal law that generally leaves insurance regulations to the states and to state law. RICO, among other things, allows for triple damages.
The question was whether the use of RICO would “impair” the state’s regulatory regime, as First Unum, a unit of UnumProvident, now just Unum, had argued. It said allowing policyholders to sue under RICO would frustrate New Jersey’s “comprehensive” regulatory regime. The court found, to the contrary, that the use of RICO would “augment” it.
The Legendary Gene Anderson tells us in an Anderson Kill & Olick press release that the Weiss decision follows and expands upon a 1999 U.S. Supreme Court decision, Humana v. Forsythe, which allowed the use of RICO in Nevada, which has explicit state laws against fraud by insurers. Weiss means that RICO can be brought in states even where anti-insurer-fraud laws are less explicit. AKO wrote an influential amicus brief filed by United Policyholders in Humana(2) and cited by the high court.
The legal details are of less interest to ITP than the fact that more interesting data may be forthcoming about Unum, about which more is to come from here in future posts.
1. Also starring Clive Owen as the embattled but fun-loving Washington Post reporter who reads it and War Eagle as himself.