Category: Wrongful Death

Exposing Carriers Who Abuse Efficient Proximate Cause

Exposing Carriers Who Abuse Efficient Proximate Cause

  1. Introduction.

Whenever there are two or more causes of a loss, it is likely that the carrier’s investigation will focus on exaggerating an excluded cause and ignoring any fact that argues for coverage.

Carriers habitually push the envelope when trying to deny coverage in concurrent causation situations. The most recent evidence is found in Palub v. Hartford Underwriters Ins. Co.,92 Cal. App. 4th 645, 112 Cal. Rptr. 2d 270 (2001) (rev. den. Dec. 12, 2001), where the Court of Appeal reaffirmed the basic principal that when the proximate cause of a loss is a covered peril, it doesn’t matter if there is an excluded peril somewhere else in the causation chain.

To the extent that the “exclusion” would exclude loss proximately caused by [a covered peril], it violates Insurance Code section 530 and the long-standing principal that a property insurer is liable whenever a covered risk is the proximate cause of a loss, and is unenforceable.

92 Cal. App. 4th at 650, 112 Cal. Rptr. 2d at 274.

Since this is an area fraught with the potential for the carrier to manipulate its investigation and coverage analysis to the policy holder’s detriment, it is critical to understand how California law applies proximate cause to insurance claims.

  1. Proximate Cause, Efficient or Otherwise.

In California, it is settled that where a policy exclusion conflicts with state law the exclusion has no effect. Howell v. State Farm Fire & Cas. Co., 218 Cal. App. 3d 1446, 1464, n.4, 267 Cal. Rptr. 708 (1990). It is also settled that where there are two or more causes of loss “concurrent causes” and the efficient proximate cause is a covered peril, then there is coverage for the loss, even if one or more of the concurrent causes is excluded.. Garvey v. State Farm Fire & Cas. Ins. Co., 48 Cal. 3d 395, 257 Cal. Rptr. 292 (1989).

Just as Justice Stanley Mosk warned in his Garvey dissent, the insurance industry has devoted considerable energy to twisting and contorting efficient proximate cause to fit any claims denial situation. Plaintiff’s counsel’s job is to us to cut through the confusion.

Whenever there are two or more causes of a loss, and one or more of those causes is excluded, the analysis begins with Insurance Code section 530, which states:

An insurer is liable for a loss of which a peril insured against was the proximate cause; although a peril not contemplated by the contract may have been a remote cause of the loss; but he is not liable for a loss of which the peril insured against was only a remote cause.

If the covered cause is closer in time to the loss than the excluded cause, this is generally where the analysis will stop. A prime example of how this works is found in Brooks v. Metropolitan Life Ins. Co., 27 Cal. 3d 305, 163 P.2d 689 (1945).

In Brooks, an insured with terminal cancer died in a fire. The carrier denied coverage under an accidental death policy, arguing essentially that since the insured would have not have died of his burns if he had not already been sick, the exclusion for “disease and mental infirmity” applied. Disease, argued the insurance company, was a concurrent cause and trumped the covered peril, i.e., death by fire.

The California Supreme Court rejected the argument:

The presence of preexisting disease or infirmity will not relieve the insurer from liability if the accident is the proximate cause of death; and [] recovery may be had even though a diseased or infirm condition appears to actually contribute to cause the death if the accident sets in progress the chain of events leading directly to death, or if it is the prime or moving cause.

Brooks, supra, 163 P. 2d at 691.

In other words, in a hypothetical claim situation such as where wind a covered peril requires replacing a roof that was previously functioning adequately and the carrier denies the claim by arguing (1) the roof was negligently installed, (2) third-party negligence is excluded, (3) the wind would not have blown off the roof but for the negligent installation, Brooks tells us that the carrier is not being reasonable.

The Brooks rule is critical in understanding proximate cause and efficient proximate cause because it was expressly followed when our Supreme Court examined an excluded cause of loss within the causal chain in Sabella v. Wisler, 59 Cal. 2d 21, 32, 27 Cal. Rptr. 689, 696 (1963) and Garvey v. State Farm Fire & Cas. Co., 48 Cal. 3d 395, 403, 257 Cal. Rptr. 292, 296 (1989).

Both Sabella and Garvey demonstrate how concurrent causation analysis becomes a shade more complex when an excluded cause occurs after a covered peril. The analysis then becomes a search for the “efficient proximate cause” of the loss, also known as the “predominate” cause.

When an excluded peril appears within the causal chain, carriers often look to Insurance Code section 532 as a basis for denying coverage. The statute provides:

If a peril is specially excepted in a contract of insurance and there is a loss which would not have occurred but for such peril, such loss is thereby excepted even though the immediate cause of loss was a peril which was not excepted.

In 1963, the California Supreme Court reconciled sections 350 and 352 in Sabella v. Wisler, 59 Cal. 2d 21, 27 Cal. Rptr. 689 (1963), which concerned a subsidence damage claim made under a homeowner policy. In Sabella, the policy specifically excluded “settling” and the carrier denied coverage, relying on section 352. The policy holder argued that the reason the house settled was that a negligently installed sewer line had ruptured, spilling water into loose fill and “setting in motion the forces tending towards settlement.” The Supreme Court held that the loss was covered because third party negligence was a covered peril under the policy and that negligence was the efficient cause of the damage.

“In determining whether a loss is within an exception in a policy, where there is a concurrence of different causes, the efficient cause the one that sets the others in motion is the cause to which the loss is attributed, though the other causes may follow it and operate more immediately in producing the disaster.”

Sabella, supra, 59 Cal. 2d at 31, 27 Cal. Rptr. at 695 (quoting, 6 Couch, Insurance (1930) § 1466). As the high court later explained in Garvey:

We reasoned [in Sabella] that sections 530 and 532 were not intended to deny coverage for losses whenever “an excepted peril operated to any extent in the chain of causation so that the resulting harm would not have occurred ‘but for’ the excepted peril’s operation.” Rather, we explained that when section 532 is read along with section 530, the “but for” clause of section 532 necessarily refers to a “proximate cause” of the loss, and the “immediate cause” refers to the cause most immediate in time to the damage.

Garvey, supra, 48 Cal. 3d at 402, 257 Cal. Rptr. at 295. Garvey reaffirmed the Sabella analysis in 1989 when the Supreme Court considered another claim for damage to a home damaged by earth movement. Again the carrier denied coverage under an earth movement exclusion and again the insureds argued that their policy covered losses caused by third party negligence. The Supreme Court looked to efficient proximate cause to solve the coverage question.

Sabella defined “efficient proximate cause” alternatively as the “one that sets others in motion” and as “the predominating or moving efficient cause.” We use the term “efficient proximate cause” (meaning predominating cause) when referring to the Sabella analysis because we believe the phrase “moving cause” can be misconstrued to deny coverage erroneously, particularly when it is understood to mean the “triggering” cause.

Garvey, supra, 48 Cal. 3d at 403-404, 257 Cal. Rptr. at 296.

Garvey, teaches a number of lessons. First, in determining an efficient proximate cause, look for an active cause that sets a causal chain in motion. Following Brooks, a simple condition of person or property can never be an efficient proximate cause.

Second, an efficient proximate cause is a predominating cause and a term of art. In denying coverage, carriers will be creative and expansive in their own definitions of efficient proximate cause, but cannot be allowed to get away with loose definitions.

  1. Reading Exclusions Out of the Policy.

Even though Sabella, Garvey, Howell and their progeny have been the law in California for over a generation, carriers still attempt to push the efficient proximate cause doctrine beyond its limits to deny coverage.

For example, some carriers will argue that efficient proximate cause translates into the “most important” cause of a loss and then will fixate on an excluded event in the chain of causation in order to document a denial. This is a position that relies on a misstatement of the law. Garvey, after all, establishes that efficient proximate cause is equivalent to predominating cause, the meaning first offered in Sabella. Nowhere do the cases discuss “most important” cause as a standard.

The distinction is not mere linguistics. Going back to our roof loss hypothetical, a sloppy roofing job may well prove adequate against the elements for a decade or more before a windstorm tears it apart. The roofer’s negligence cannot by definition be an efficient proximate cause of the loss because it sets nothing in motion. It is simply a state of condition and the Brooks rule is that “recovery may had even though a diseased or infirm condition appears to actually contribute to cause the [loss] if the [covered peril] sets in progress the chain of events leading directly to [the loss], or if it is the prime or moving cause.” 163 P.2d 689, 691. Since it is the windstorm a covered peril that sets the damage chain in motion, following Brooks, Sabella and Garvey, windstorm is the efficient proximate cause and triggers coverage under the policy.

For its part, roofer negligence an excluded peril is an infirm condition that is a remote cause as a matter of law and cannot defeat coverage. The reasonable expectations of both insured and insurer that wind damage is covered are met. The carrier is free to pursue the roofer on its own in subrogation, but it must pay the claim benefits provided by the policy.

Palub v. Hartford Underwriters Ins. Co., 92 Cal. App. 4th 645, 112 Cal. Rptr. 2d 270 (2001), provides a good example of how carriers continue to try to abuse efficient proximate cause analysis. In Palub, the insureds made a claim under their all-risk homeowner policy for damage to their home after a slope behind the house failed. The insured argued that weather conditions caused the slope to fail and were the efficient proximate cause of the loss. The insurer argued that weather conditions were excluded under the policy by a provision stating, “We do not insure against loss to property . . . caused by any of the following . . . (a) Weather conditions. However, this exclusion only applies if weather conditions contribute in any way with a cause or event excluded in paragraph 1. above to produce the loss.”

The Court of Appeal observed that in light of this language, weather conditions were not an excluded cause of loss by themselves. The Court also held that to the extent that the policy provision attempted to exclude coverage for weather conditions that acted as the efficient proximate cause of a loss, the exclusion violated Insurance Code section 530 and was unenforceable.

Palub, in turn, relied on Howell v. State Farm Fire & Cas. Co., 218 Cal. App. 3d 1446, 267 Cal. Rptr. 708 (1990), which addressed much the same problem. Howell involved an all-risk homeowner’s policy and a claim for damage due to landslide. The insured argued that fire had destroyed the vegetation on a nearby slope and unusually heavy rains then drenched the bare unprotected ground, resulting in a landslide. An expert testified that the landslide probably would not have happened had the ground cover been intact. The Court held that the fire was the efficient proximate cause of the loss under this analysis and found coverage. 218 Cal. App. 3d at 456, 267 Cal. Rptr. at 714-715.

The primary issue decided by Howell is that an insurer cannot contractually exclude coverage when an insured peril is the efficient proximate cause of the loss, no matter how the policy is written. Any exclusion purporting to defeat coverage where the efficient proximate cause is a covered peril is simply read out of the policy.

  1. Conclusion.

Just as Justice Mosk warned in Garvey, the efficient proximate cause analysis has tempted many a carrier to engage in studied mischief. But Sabella and Garvey provide the bedrock definitions for efficient proximate cause. Brooks confirms that a pre-existing, latent infirmity can never be an efficient proximate cause since is a condition rather than a moving cause. And Palub and Howell render inapplicable exclusions that seek to limit coverage where a covered peril is the efficient proximate cause of loss.

Bill Daniels is a trial lawyer and shareholder with the law firm of DANIELS LAW in Sherman Oaks, CA.  A graduate of Loyola Law School of Los Angeles, he is a former member of the Consumer Attorneys Association of Los Angeles Board of Governors, a founding member of Loyola’s Civil Justice Program and a past president of the Encino Lawyers Association.  Since 2007, he has been named a Southern California “Super Lawyer” by Los Angeles Magazine.  Mr. Daniels focuses his practice on serious personal injury, insurance and employment. For information, visit our website at www.daniels.legal or contact us through e-mail: Info@danielslaw.com.

Why Campbell Doesn’t Necessarily Mean We’re In The Soup

Why Campbell Doesn’t Necessarily Mean We’re In The Soup

law building

  1. Introduction.

tomato soupOn April 7, 2003, the U.S. Supreme Court published State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. ___ (2003), its latest pronouncement on punitive damages as viewed through the lens of the Due Process Clause of the Fourteenth Amendment of the United States Constitution.

Campbell reversed a jury’s $145 million punitive damage award that had previously been upheld by the Utah Supreme Court. The punitive award was based in large part upon evidence of State Farm’s misconduct in not just Utah, but also across the entire United States.

Observing that the $1 million compensatory component of the jury verdict (reduced from $2.6 million by Utah’s intermediate appellate court) resulted in a compensatory/punitive damage ratio of 145-to-1, the high court applied a three-pronged analysis first announced in BMW of North America v. Gore, 517 U.S. 559 (1996).

The test required examining: (1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. Slip Op. at 7.

Writing for the 5-3 majority, Justice Kennedy found infirmities under all three Gore “guideposts.” What’s more, in reaching its holding, the majority announced, “We decline again to impose a bright-line ratio which a punitive damage award cannot exceed. Our jurisprudence and the principles it has now established demonstrate, however, that, in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.” Slip Op. at 14.

So the question presents itself. What practical effect does Campbell present for a California product liability practitioner?

To learn the answer, we probably need delve no further than Romo v. Ford Motor Co., 99 Cal. App. 4th 1115, 122 Cal. Rptr. 2d 139 (2002).

The Romo opinion upholds a $290 million punitive damage award against Ford in a Bronco II rollover case, where the compensatory damages were $4,935,709.10 (reduced from just over $6.2 million by the trial court), a roughly 58-to-1 ratio. Finding that the punitive award squared with federal due process under Gore, the Fifth District of the California Court of Appeal engaged in an analysis similar to that in Campbell, excepting of course, the result.

black truckAfter failing in efforts for hearing by the California Supreme Court or for de-publication of Romo, Ford filed a petition for certiorari to the U.S. Supreme Court, which is currently pending. 71 U.S.L.W. 3519 (Jan. 21, 2003).

Since Campbell discusses punitive damages in an insurance bad faith context involving essentially pure emotional distress damages, while Romo involved both death and serious personal injuries, we may well see the high court weighing in yet again on punitive damages in the near term, only this time in the product liability arena. Even so, using the Campbell rationale as our guide, practitioners should not lose heart. At least from an initial vantage point, it may well be safe to say that all in all, not that much has changed.

  1. Fourteen Years of Punitive Damage Jurisprudence.

During the past fourteen years or so, the U.S. Supreme Court has busied itself in reexamining punitive damages and how they apply in civil cases. The high court’s interest was fueled by a conservative concern that juries acting out of “arbitrariness, caprice, passion, bias, and even malice” were responsible for punitive damage verdicts that had “run wild.” See, TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 474-476 (1993) (J.O’Connor, dissenting).

The critical journey began with Browning-Ferris Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257 (1989), which held that neither the Excessive Fines Clause of the Eighth Amendment nor federal common law circumscribe punitive damage awards in civil cases between private parties.

Following were Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1 (1991), TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443 (1993), Honda Motor Co., Ltd. v. Oberg, 512 U.S. 415 (1994), BMW of North America., Inc. v. Gore, 517 U.S. 559 (1996) and Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424 (2001).

In each, the high court has continually reexamined how punitive damages apply in civil actions and what, if any limits, the U.S. Constitution places on punitive awards.

While the detailed parameters of each decision leading up to Campbell are beyond the scope of this article, in each opinion, the majority declined to announce any specific formula for what constituted an upper limit of a punitive award under the Federal Constitution. Indeed, one important constraint over the years was the healthy conservative notion that, so far as punitive damages represent legitimate exercise of state police power, any potential limitations on such awards are properly reserved to the several states.

Then came Campbell.

The decision caused something of a stir upon publication, largely because it seemed as if the high court was applying some sort of fixed arithmetic formula for the first time to impose due process limits on punitive awards. As Justice Kennedy wrote:

We decline again to impose a bright-line ratio which a punitive damages award cannot exceed. Our jurisprudence and the principles it has now established demonstrate, however, that in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.

Slip Op. at 14.

So, where does Campbell leave the practitioner evaluating an action involving dangerous products?

  1. Why Campbell isn’t a Product Liability Decision.

Campbell involved an insurance bad faith action in which a Utah jury awarded $145 million in punitive damages based upon a failure to settle by State Farm.

While the Supreme Court agreed that “State Farm’s handling of the claims against the Campbells merits no praise,” it took issue with an 145-to-1 compensatory/punitive ratio in what it viewed as essentially a pure emotional distress matter.

The compensatory award in this case was substantial; the Campbells were awarded $1 million for a year and a half of emotional distress. This was complete compensation. The harm arose from a transaction in the economic realm, not from some physical assault or trauma; there were no physical injuries; and State Farm paid the excess verdict before the [bad faith] complaint was filed, so the Campbells suffered only minor economic injuries for the 18-month period in which State Farm refused to resolve the claim against them.

Slip Op. at 15-16.

True, the majority, in their haste to justify their arbitrary limit, came to some questionable conclusions. For example, Justice Kennedy wrote:

The compensatory damages for the injury suffered here, moreover, likely were based on a component which was duplicated in the punitive award. Much of the distress was caused by the outrage and humiliation the Campbells suffered at the actions of their insurer; and it is a major role of punitive damages to condemn such conduct. Compensatory damages, however, already contain this punitive element.

Slip Op. at 16.

This language leaves it open to speculation as to whether the high court was implying in its decision that juries uniformly ignore instructions specifically deleting punitive damages from a compensatory damage verdict.

Of course, in California, “Jurors ordinarily are presumed to have followed the court’s instructions.” Romo v. Ford Motor Co., 99 Cal. App. 4th 1115, 1131, 122 Cal. Rptr. 2d 139, 150 (2002). During the usual trial bifurcated on compensatory and punitive damages, BAJI 14.61 instructs: “Do not include as damages any amount that you might add for the purpose of punishing or making an example of the defendant for the public good or to prevent other accidents. Those damages would be punitive and they are not authorized in this action.” So, the comment about compensatory damages having a punitive component must apply to Utah only, or at least, cannot apply to California.

Even so, in discussing the Campbell rationale, it is critical to observe that the decision is distinguishable where personal injuries or death are the subject of a punitive award.

  1. Following Campbell, Personal Injury Justifies a High Compensatory/Punitive Ratio.

The majority appeared to carve out personal injury claims from its discussion, perhaps in order to save them for another day. Even so, Campbell is consistent with prior U.S. Supreme Court and California authority standing for the proposition that injury to persons cannot be fairly compared with economic injury.

The notion that wrongful conduct causing injury to another person is always of greater consequence than economic injury was a substantial basis for the result in Gore, where a 500-to-1 ratio between the damage suffered (cost of repair to a defectively painted BMW automobile) and punitive award ($2 million, reduced from $4 million by the Alabama Supreme Court) was held as exceeding constitutional limits. Campbell sticks with that notion, acknowledging that unlawful conduct that injures or kills is more reprehensible than economic injury as a matter of law.

“[T]he most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant’s conduct.” We have instructed courts to determine the reprehensibility of a defendant by considering whether: the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident. [Citations omitted.]

Slip Op. at 8 (quoting Gore, supra, 517 U.S., at 575-577).

By way of contrast, it was Ford’s “institutional mentality . . . shown to be one of callous indifference to public safety” that formed the basis for supporting a punitive damage award in the seminal Ford Pinto burn case, Grimshaw v. Ford Motor Co., 119 Cal. App. 3d 757, 174 Cal. Rptr. 348 (1981). The notion that injuring a person or taking human life justifies an enhanced punitive award has carried forward in California decisional law, most recently in Romo.

As noted . . . the ultimate question is whether the award is grossly excessive in relation to the interests the state seeks to protect through the award. As we have already discussed, defendant’s conduct was grossly reprehensible. While defendant did not intend the death to the victims, the award here cannot be compared to cases “involving a business fraud resulting only in economic harm.” [Citations omitted.]

Romo, supra, 99 Cal. App. 4th at 1150, 122 Cal. Rptr. 2d at 165.

The Court of Appeal in Romo noted that Ford’s conduct in marketing an unstable, inherently dangerous vehicle like the Bronco II, while failing to warn of its dangerous propensities, constituted conduct likely to cause human injury and death wherever Ford marketed the vehicle. “[Unlike Gore], where the defendant’s conduct was not even unlawful in all states and involved only economic consequences, the conduct here placed tens of thousand of lives at risk and actually claimed three lives in the present case.”

Since the Campbell punitive award substantially rested on State Farm’s national claims handling practices, some of which was not illegal in states other than Utah, this becomes an important basis for distinguishing Campbell in product actions.

Just as important, where punitive damages are justified in product liability actions, there is often substantial evidence of a long history of repeated, knowing, wrongdoing. The high court in Campbell noted that a higher compensatory/punitive ratio is generally justified by evidence of repeated wrongful conduct by a corporate defendant.

Although “[o]ur holdings that a recidivist may be punished more severely than a first offender recognize that repeated misconduct is more reprehensible than an individual instance of malfeasance,” in the context of civil actions courts must ensure the conduct in question replicates the prior transgressions. [Citations omitted.]

Slip Op. at 13 (quoting Gore, supra, at 577).

Again, this provides a significant basis to distinguish Campbell in product actions.

  1. Conclusion.

At the end of the day, so far as punitive damages and product liability is concerned, it really doesn’t appear that much has changed.

After all, in the 1981 seminal Pinto exploding gas tank case, Grimshaw, the trial court reduced a jury’s $125 million punitive award, reasoning that a 44-to-1 compensatory/punitive ratio was excessive as a matter of law. The reduction was to $3.5 million, a 1.4-to-1 ratio. Since under Campbell, it takes a 10-to-1 ratio or better before a punitive award is “suspect,” had Grimshaw been decided today, the trial court might well have felt more free to increase the number it allowed.

The U.S. Supreme Court, of course, will have the opportunity to weigh in on this discussion should it hear Romo. Even so, take heart. Just because we now have Campbell, doesn’t mean we’re in the soup.

The result is always the same. Innocent insureds are left to fend for themselves. The carrier and agents defend based on the notion that they owe “no duty” to have prevented or to right the particular wrong. A struggle ensues.

Bad faith law may be insufficient to address the situation, especially if the mistake has to do with a faulty insurance application or a failure to provide adequate limits or coverages. Breach of the implied covenant of good faith and fair dealing generally requires a breach of the insurance contract and the policy declarations or coverages are often exactly what the agents/carrier mistakenly put into place.

Catch 22, anyone?

The solution is to think outside of the box just a little bit and examine what is really going on in the insured/agent/insurer relationship, because the nature and extent of the relationship will ultimately define where the duty truly lies. Fortunately, this area is one of the few in insurance law that has grown more sympathetic to insureds during the past decade.

  1. Defining Different Levels of Duty.

The typical agent/carrier mistake problem requires analyzing duty at multiple levels. The duties can involve a fiduciary duty under certain circumstances, a duty to perform reasonably or a duty created by an oral or written contract.

The duties themselves will define the remedies available to the insured in the event of a breach so the level of duty involved becomes critical in prosecuting a claim.

Breach of fiduciary duty is the most interesting, both because it has recently been affirmed as available under certain circumstances (Tran v. Farmers Group, Inc. (2002) 104 Cal.App.4th 1202, 128 Cal.Rptr.2d 728) and because it presents a potential for obtaining punitive damages.

Negligent breach of a duty to perform resulting in damages is also important, but will generally only become available where the agent or insurer have acted in such a fashion where they can be seen to have adopted a special duty towards the insured. See e.g., Paper Savers, Inc. v. Nacsa (1996) 51 Cal.App.4th 1090, 59 Cal.Rptr.2d 547; Desai v. Farmers Ins. Exchange (1996) 47 Cal.App.4th 1110, 55 Cal.Rptr.2d 276; Free v. Republic Ins. Co. (1992) 8 Cal.App.4th 1726, 11 Cal.Rptr.2d 296. Under this theory, both agent and insurer may be liable for the agent’s negligence in misrepresenting policy terms or the extent of coverage provided. In addition, the measure of available damages may, in the right case, include attorneys fees and costs. Saunders v. Cariss (1990) 224 Cal.App.3d 905, 274 Cal.Rptr. 186.

Finally, where there is an oral or written agreement to provide a certain level of insurance protection, there is the potential for a breach of contract to provide insurance. The damages available would be the same as for any contractual breach.

Read more on this topic on my website, including:

  1. The Fiduciary Duty as applied to a Carrier. A significant duty in the proper case.
  2. Finding a Duty of Care.
  3. Finding a Contractual Duty.

Insureds sometimes need to rely on the expertise of agents and carriers to obtain the correct coverages and limits that will best protect them. When agents and carriers act as insurance experts but drop the ball, they should do the right thing. When they won’t, it’s up to the consumer lawyer to set things right.

 

Bill Daniels is a trial lawyer and shareholder with the law firm of DANIELS LAW in Sherman Oaks, CA.  A graduate of Loyola Law School of Los Angeles, he is a former member of the Consumer Attorneys Association of Los Angeles Board of Governors, a founding member of Loyola’s Civil Justice Program and a past president of the Encino Lawyers Association.  Since 2007, he has been named a Southern California “Super Lawyer” by Los Angeles Magazine.  Mr. Daniels focuses his practice on serious personal injury, insurance and employment. For information, visit our website at www.daniels.legal or contact us through e-mail: Info@danielslaw.com.

Trying The Insurance Bad Faith Case

Trying a bad faith case is just like trying any other case and then again, it isn’t.

As in any trial, the plaintiff’s case of bad faith against an offending carrier must be presented in terms of right and wrong, social responsibility and doing justice by restoring balance between insurer and insured.

Yet, in a larger sense, the bad faith trial is in its essence a retelling of the Biblical tale of how David took on Goliath. In an insurance transaction, the carrier is the party with the power. The carrier has the power of the pen when the insurance contract is made, it has the power of knowledge when the claim is presented, it has the power of the purse when it decides to deprive its insured of benefits rightfully owed.

This tale of the use and abuse of power is set on a stage that is at both familiar, since we all have insurance, and strange, as insurance law can seem arcane and confusing.

When your tale of how the defendant abused its power position to the detriment of its trusting insured comes through, you will obtain a great result for your client.

Some tips continued on my website.

Bill Daniels is a trial lawyer and shareholder with the law firm of DANIELS LAW in Sherman Oaks, CA.  A graduate of Loyola Law School of Los Angeles, he is a former member of the Consumer Attorneys Association of Los Angeles Board of Governors, a founding member of Loyola’s Civil Justice Program and a past president of the Encino Lawyers Association.  Since 2007, he has been named a Southern California “Super Lawyer” by Los Angeles Magazine.  Mr. Daniels focuses his practice on serious personal injury, insurance and employment. For information, visit our website at www.daniels.legal or contact us through e-mail: Info@danielslaw.com.

Searching for a Higher Duty When an Insurer Refuses to Admit its own Mistakes

Searching for a Higher Duty When an Insurer Refuses to Admit its own Mistakes  

  1. Why won’t they just “do the right thing?”

People make mistakes. It’s part of being human.

Even so, over and over we see cases where an insurance carrier or its designated agent makes an error and then stubbornly denies responsibility. The carriers/agents just won’t “do the right thing” in industry parlance.

The result is always the same. Innocent insureds are left to fend for themselves. The carrier and agents defend based on the notion that they owe “no duty” to have prevented or to right the particular wrong. A struggle ensues.

Bad faith law may be insufficient to address the situation, especially if the mistake has to do with a faulty insurance application or a failure to provide adequate limits or coverages. Breach of the implied covenant of good faith and fair dealing generally requires a breach of the insurance contract and the policy declarations or coverages are often exactly what the agents/carrier mistakenly put into place.

Catch 22, anyone?

The solution is to think outside of the box just a little bit and examine what is really going on in the insured/agent/insurer relationship, because the nature and extent of the relationship will ultimately define where the duty truly lies. Fortunately, this area is one of the few in insurance law that has grown more sympathetic to insureds during the past decade.

  1. Defining Different Levels of Duty.

The typical agent/carrier mistake problem requires analyzing duty at multiple levels. The duties can involve a fiduciary duty under certain circumstances, a duty to perform reasonably or a duty created by an oral or written contract.

The duties themselves will define the remedies available to the insured in the event of a breach so the level of duty involved becomes critical in prosecuting a claim.

Breach of fiduciary duty is the most interesting, both because it has recently been affirmed as available under certain circumstances (Tran v. Farmers Group, Inc. (2002) 104 Cal.App.4th 1202, 128 Cal.Rptr.2d 728) and because it presents a potential for obtaining punitive damages.

Negligent breach of a duty to perform resulting in damages is also important, but will generally only become available where the agent or insurer have acted in such a fashion where they can be seen to have adopted a special duty towards the insured. See e.g., Paper Savers, Inc. v. Nacsa (1996) 51 Cal.App.4th 1090, 59 Cal.Rptr.2d 547; Desai v. Farmers Ins. Exchange (1996) 47 Cal.App.4th 1110, 55 Cal.Rptr.2d 276; Free v. Republic Ins. Co. (1992) 8 Cal.App.4th 1726, 11 Cal.Rptr.2d 296. Under this theory, both agent and insurer may be liable for the agent’s negligence in misrepresenting policy terms or the extent of coverage provided. In addition, the measure of available damages may, in the right case, include attorneys fees and costs. Saunders v. Cariss (1990) 224 Cal.App.3d 905, 274 Cal.Rptr. 186.

Finally, where there is an oral or written agreement to provide a certain level of insurance protection, there is the potential for a breach of contract to provide insurance. The damages available would be the same as for any contractual breach.

Read more on this topic on my website, including:

  1. The Fiduciary Duty as applied to a Carrier. A significant duty in the proper case.
  2. Finding a Duty of Care.
  3. Finding a Contractual Duty.

Insureds sometimes need to rely on the expertise of agents and carriers to obtain the correct coverages and limits that will best protect them. When agents and carriers act as insurance experts but drop the ball, they should do the right thing. When they won’t, it’s up to the consumer lawyer to set things right.

Bill Daniels is a trial lawyer and shareholder with the law firm of DANIELS LAW in Sherman Oaks, CA.  A graduate of Loyola Law School of Los Angeles, he is a former member of the Consumer Attorneys Association of Los Angeles Board of Governors, a founding member of Loyola’s Civil Justice Program and a past president of the Encino Lawyers Association.  Since 2007, he has been named a Southern California “Super Lawyer” by Los Angeles Magazine.  Mr. Daniels focuses his practice on serious personal injury, insurance and employment. For information, visit our website at www.daniels.legal or contact us through e-mail: Info@danielslaw.com.

Discovery and Depositions in the Bad Faith Case: What You Need to Know

Discovery and Depositions in the Bad Faith Case: What You Need to Know  

     Introduction

Insurance bad-faith cases are usually hard fought and can be bitter.

Generally speaking, when we take on a carrier for acting contrary to its insured’s interests and allege those actions are malicious justifying punitive damages, the folks on the defense side tend to take it personally.

So, the first rule of discovery in the bad faith case is, assume you are in for a tough fight. Which, in turn, leads to the second and third rules: know your adversary and be prepared.

The bad news that the general practitioner faces in prosecuting a bad faith case is that the defense team will usually be much better schooled in the fine points of insurance than an attorney who does not work with insurance matters on a daily basis.

The good news that the general practitioner can take heart from is B the purpose of bad faith law is to act as an equalizer between the powerful carriers who adjust claims for a living and the ordinary insured who probably never wanted to have a claim and, with luck, will never have another. Insurance regulations require that insurance companies keep a record of all material claims decisions. So, where there is wrongdoing, there is almost always a record of the bad acts waiting to be uncovered.

The key discovery strategy in defending bad faith cases is to deny the plaintiff information. However, if you know where and how to dig, it’s not that difficult to get the evidence you need to put on your successful case.

   Know your adversary

People spend their lives learning about the insurance business, which itself represents a huge, multifaceted, globally diverse industry devoted to making money by spreading risk. Generally, you do not have a lifetime to learn each and every nuance of the insurance world. So, don’t try. But do make sure you know everything you can about the facts and circumstances of the insurance business as it applies to your case.

Understand that the defendant or defendants in your prospective case may not be obvious from the face of the insurance materials your clients hand you. For example, it is not unusual to have a client provide letters on letterhead from the “Farmers Insurance Group of Companies.” Some practitioners will put this name in their complaint. Only, there is no such creature that can be sued. “Farmers Insurance Group of Companies” is simply the trade name for a collective of entities organized as inter-insurance exchanges. Usually, the proper defendants in a Farmers claims case are Farmers Group, Inc. (the management company), Farmers Insurance Exchange (the claims handling entity) and the insuring exchange (ie., Fire Insurance Exchange, Truck Insurance Exchange, etc.). See, Tran v. Farmers Group, Inc. (2002) 104 Cal.App.4th 1202 (rev. den. Mar. 26, 2003).

So, when laying out your case, always make sure you closely review the original insurance policy and declarations pages prior to determining who to name in your complaint. When in doubt, consult with experienced practitioners about who the proper parties are and why. Getting the defendants right at the beginning can save tremendous amounts of time during the case.

Also, make sure you understand who has standing to sue under the insurance policy. A business owner may not be able to sue for bad faith if the named insured is a corporation or limited liability company. On the other hand, the owner may have standing as an additional insured. The question is important where there is a potential for emotional distress and other general damage to the owner. Again, look to the policy and declarations pages for the answer.

 Getting to the Heart of Your Case in 60 days or less.

Once you have the parties clear in your mind and have filed suit, you can prepare your initial round of discovery for service once the defendants answer or, as is more typical, demur.

I seldom use interrogatories during my initial bad faith discovery. I find it is much more productive to immediately demand the claim file(s) and, if warranted, the underwriting file(s), since these are the basic documents necessary for preparing any bad faith case for trial.

Because these files are key evidence in the case, and in order to discourage potential mischief in discovery, I ask for the documents in multiple requests, simultaneously, using a formal request for production of documents, along with a custodian of records deposition notice and notice of deposition of the person most qualified. By utilizing this process, I find I am able to exert maximum pressure on the defense to produce the entire record all at once. This process also insures that I will be able to either establish foundation for the insurance files either by direct testimony or stipulation, so that they are admissible later in the case. Do not assume that a claim file or any other document will be admitted at trial under the business records exception to the hearsay rule. Nail down the foundation as you go, it will save much grief later on.

It is also important to make sure that the original files are available during any depositions. Copies of files don’t do the originals justice B often information about file handling can be gleaned from handwriting on the file folders themselves or how the files are organized. It is much easier for insurance adjusters and other key witnesses to evade answering key questions if the original files are not in front of them. Copies of file materials are okay as part of a document production and, in fact, are easier to handle as you organize your case. But make sure you request to see the originals and insist they be produced.

Person most qualified depositions under Code of Civil Procedure section 2025.220 are the fastest way to gain general information about the basic handling of the claim or other insurance matter that lies at the heart of your case. I typically notice the person most qualified to testify regarding the identities of each and every individual who performed work or made a decision in the matter. Generally, the witness will be the primary claims adjuster, which is fine. However, the PMQ deposition helps avoid wasting time meeting and conferring over boilerplate objections and incomplete responses typical when interrogatories are served.

Also, try to determine whether or not the defense will be allowing on advice of counsel as a defense by serving a simple Request for Admission that is on point. Carriers generally do not like using the defense since it opens up areas that would otherwise be privileged. But don’t assume it won’t be used. Ask up front.

I have number of sample deposition notices, discovery requests and requests for admissions that are regularly requested from me. If you’re interested, click here for the set. Please note, the forms I provide use the old Code of Civil Procedure sections, so you should update them before using them in your case

 Focusing Depositions

Once I know who was involved with the claim or other insurance matter I am concerned with, I typically depose everyone who touched the file in any way. Even if the deposition lasts only fifteen minutes, absent a stipulation, getting the testimony is the only way to insure that all the potential holes in your cases are filled.

I prefer to video all key depositions, particularly the adjusters and claims personnel. The best insurance bad faith cases are generally morality plays where the attitude and demeanor of the witnesses are just as important as their precise testimony. A picture, as the saying goes, is often worth a thousand words.

When deposing insurance professionals, I almost always begin by getting them to agree with me as to basic principles such as an insurance carrier must give its insured’s interests equal weight with its own,” an insurer is obligated to conduct a thorough, fair and objective investigation into the facts of a claim,” etc. Once I establish the common framework of duty, I use those basic principles to tie down the witness while going through the claim.

Lists of duties and obligations can be gleaned from the case law, jury instructions and your experts. Make one up that works for your case and use it from day one.

In deposing witnesses, utilize the insurance files you obtained at the beginning of the case as both a guide to questioning and evidentiary support for your case. Adjusters will have diary notes, these should be analyzed and authenticated by the witness. If it is unclear just what notes or materials were created by the witness, don’t be afraid to ask. Unraveling how a claim was handled is often like piecing together an intricate puzzle. Be thorough with each witness and you will not need to fear missing pieces when your discovery is concluded.

Also, just as in any case, don’t be afraid to lead adverse witnesses as allowed by Evidence Code section 776. Leading questions are the best way to focus an adverse witness, especially one that might be inclined to waste your time with irrelevant insurance technicalities and side issues.

   Conclusion

There’s no magic to conducting bad faith discovery. Just preparation, study and hard work.

While the basics outlined in this article should help you get going, don’t forget that there is a strong community of insurance bad faith practitioners available who can help answer particular questions or give guidance on technical issues.

In my mind, there is no nobler endeavor than fighting for deserving individuals who have been legitimately wronged by powerful institutions. Hopefully, you are of the same mind. So, go get ’em!

 

Bill Daniels is a trial lawyer and shareholder with the law firm of DANIELS LAW in Sherman Oaks, CA.  A graduate of Loyola Law School of Los Angeles, he is a former member of the Consumer Attorneys Association of Los Angeles Board of Governors, a founding member of Loyola’s Civil Justice Program and a past president of the Encino Lawyers Association.  Since 2007, he has been named a Southern California “Super Lawyer” by Los Angeles Magazine.  Mr. Daniels focuses his practice on serious personal injury, insurance and employment. For information, visit our website at www.daniels.legal or contact us through e-mail: Info@danielslaw.com.

Five Fatal Bad-Faith Mistakes and How to Avoid Them

Five Fatal Bad Faith Mistakes and How to Avoid Them

Breach of the implied covenant of good faith and fair dealing in an insurance contract, or “bad faith” in the vernacular, is a tricky critter.

Ten years ago, bad faith was a staple for consumer lawyers; today, some will tell you it’s a dying area of the law. Don’t believe the doomsayers. While there is no question that bad faith litigation is not a practice area for the faint of heart, bad faith law remains a powerful tool to obtain justice for consumers.

With all that in mind, this is not an area for the unprepared. Here are five fatal mistakes you should take care to avoid:

  1. Not looking for the “mean” in your case.

“The mark of a good bad-faith case is meanness,” one of my mentors once told me. He believed that for a bad faith case to fly, there had to be conduct beyond something irritating or just maddening.

What you need to look for is conduct that is mean, insensitive or unfeeling. If you’re just uneasy or have some vague notion the world should be different, be sympathetic, but take a careful look at the law before diving in.

 

  1. Forgetting to make sure there’s coverage.

No policy, no bad faith is the simple rule. Though there are areas where the simple rule won’t apply, that doesn’t mean you shouldn’t pay coverage close heed right from the get go.

The lesson here is, never take coverage for granted. Make sure you understand the carrier’s reasoning for doing what it did in every intimate detail. Study the correspondence, collect the key cases, gather whatever articles you can find on point. Also, bone up on the genuine dispute doctrine whenever coverage is in dispute. See, e.g., Chateau Chamberay Homeowners Ass’n v. Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 335.

  1. Not gathering all the facts during your investigation.

There’s a temptation to seize on one or two key documents or bits of evidence that seem to show outrageous conduct and try to ride those through to the end, ignoring everything else. Resist that temptation.

The insurance regulations require carriers to keep records on everything material that takes place during a claim. Get copies of all that stuff and make sure the defense brings the originals to deposition so you can do your own inspection. If there’s an underwriting issue, get all those files as well.

Make sure your client gives you every scrap of paper connected with the claim, whether they think it is relevant or not. If the client is a poor record keeper, worry about that. It is amazing how a small, stray piece of documentation can rise up and bite you in a bad faith case.

A little paranoia is probably a good thing here. Remember, the law right now is probably as favorable for carriers as it’s been in several generations. Conduct yourself accordingly.

  1. Not preparing for trial.

Don’t work up the case for settlement or to win on summary judgment. Prepare the darned thing for trial. Anticipate the worst and then if something better happens, celebrate. Only, do not ever under-prepare a bad faith case.

Remember what insurance companies do for a living. They sell promises on paper, pay some claims, deny the rest and defend their decision-making process to the death. You may have a great bad faith case in your file cabinet, but if you aren’t experienced in the area, beware, because the folks defending will be.

So, put in the time and gather the knowledge. Then put everything together as if you will go to trial.

  1. Not facing reality.

There’s a difference between being a believer and being a fool. Believers understand their cases, warts and all, but know in their hearts they can steer the client through the system and get justice. Fools don’t understand what they have in their file cabinet, but bull ahead anyway.

As you litigate, make sure you constantly study, analyze and evaluate.

Go get’em.

When you choose to litigate against a carrier, go in smart. Consult an experienced practitioner where you have questions. Remember to avoid the five common mistakes and, good hunting!

 

Bill Daniels is a trial lawyer and shareholder with the law firm of DANIELS LAW in Sherman Oaks, CA.  A graduate of Loyola Law School of Los Angeles, he is a former member of the Consumer Attorneys Association of Los Angeles Board of Governors, a founding member of Loyola’s Civil Justice Program and a past president of the Encino Lawyers Association.  Since 2007, he has been named a Southern California “Super Lawyer” by Los Angeles Magazine.  Mr. Daniels focuses his practice on serious personal injury, insurance and employment. For information, visit our website at www.daniels.legal or contact us through e-mail: Info@danielslaw.com.

Warm Weather Means More Riders on the Road

The forecasters are predicting warm and clear weather this weekend, stressing the importance of alertness when out on the road.

April was Distracted Driving Awareness Month and May is Motorcycle Safety Awareness Month. It is essential that all road users are reminded to never drive, ride, walk or bicycle while distracted.

Whether a driver is at an intersection or changing lanes, they should always keep an eye out for motorcyclists. Because motorcycles have a much smaller profile than other vehicles, it can be difficult for drivers to judge the distance and speed of an approaching motorcycle.

Motorcyclists have responsibilities, too. They should obey traffic rules, be alert to other drivers, never ride while impaired or distracted, and always wear proper protective gear, including a helmet.

The warmer weather brings more traffic to the roads, especially near the parks and beaches. During thsi time, it’s important to be more vigilant in staying alert while driving and riding.

“Share the Road” is the message during Motorcycle Safety Awareness Month

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Bill Daniels is a trial lawyer and shareholder with the law firm of DANIELS LAW in Sherman Oaks, CA.  A graduate of Loyola Law School of Los Angeles, he is a former member of the Consumer Attorneys Association of Los Angeles Board of Governors, a founding member of Loyola’s Civil Justice Program and a past president of the Encino Lawyers Association.  Since 2007, he has been named a Southern California “Super Lawyer” by Los Angeles Magazine.  Mr. Daniels focuses his practice on serious personal injury, insurance and employment. For information, visit our website at www.daniels.legal or contact us through e-mail: Info@danielslaw.com.
 

Put down that cell phone! A life is far more important!

April has been declared Distracted Driving Awareness Month nationwide. The effort is designed to educate drivers of the hazards of not concentrating on driving. Ordinarily a few seconds may not seem like a long time. If you’re behind the steering wheel of a moving vehicle, however, just a few seconds can change your life. Cell phones, texting, eating, changing CD’s – all such distractions can be fatal in the blink of an eye.

An estimated 1.8 million crashes are caused each year by alleged distracted drivers, according to the National Safety Council. The AAA Foundation notes that cell phone users quadruple the chance of a crash.

Despite these dangers, countless drivers engage in potentially distracting secondary tasks 30% of the time their vehicles are in motion, according to the AAA Foundation report. This law is about protecting the public. During National Distracted Driver Month, law enforcement agencies across the state will be on the lookout for those drivers who seem to believe they’re above the law by violating the hands-free law, eating or applying makeup while not focusing on the road. A distracted driving violation is going to cost you a minimum of $160 and the maximum ranges from serious personal injuries to the loss of lives.

Using a cell phone in the car is a habit. Saving your life and the lives of others can start with making new, safer habits.

1.) Turn your phone off or just put it out of reach.

2.) Stop using the phone when you get in the car. If it rings, let it ring. It’s not a matter of life or death to answer the phone, but it may be a matter of life or death if you do. Let your caller go to voice mail and leave a message and you can call them back when you are no longer on the road.

3.) If you believe the call is really critical – a.) let it go to voice mail b.) find the nearest place to pull over safely and c.) listen to your message, and d.) call back if necessary.

Using your cell phone and texting at stop signs and red lights is just as dangerous and illegal as when you are moving.

4.) Recognize behaviors that are dangerous and make the necessary changes.

A life is far more important than a cell phone call or a text message.

 

Bill Daniels is a trial lawyer and shareholder with the law firm of DANIELS LAW in Sherman Oaks, CA.  A graduate of Loyola Law School of Los Angeles, he is a former member of the Consumer Attorneys Association of Los Angeles Board of Governors, a founding member of Loyola’s Civil Justice Program and a past president of the Encino Lawyers Association.  Since 2007, he has been named a Southern California “Super Lawyer” by Los Angeles Magazine.  Mr. Daniels focuses his practice on serious personal injury, insurance and employment. For information, visit our website at www.daniels.legal or contact us through e-mail: Info@danielslaw.com.

One text could be your last. April is Distracted Driving Awareness Month

National Safety Council estimates that at least 1.6 million crashes each year involve drivers using cell phones and texting.

Distracted driving is the number one killer of American teens. Alcohol-related accidents among teens have dropped, but teenage traffic fatalities have remained unchanged because distracted driving is on the rise. ( Children’s Hospital of Philadelphia/State Farm Insurance Study and NHTSA Study)

In California, all drivers are banned from texting while driving, however, accident research still indicates that drivers are ignoring this law assuming they can “multi-task.”  Sending or receiving a text takes a driver’s eyes from the road for an average of 4.6 seconds, the equivalent-at 55 mph-of driving the length of an entire football field, blind. (VTTI).

Injuries in auto accidents can vary from small scratches, to life long life-changing injuries (i.e.: head injuries, spinal cord injuries, loss of libs, etc.) to loss of your life or the life of someone you love. I posted how it how it cost one young lady her life. This teen proved in the last minutes of her life she knew right from wrong — but still committed a fatal mistake. She wrote in her final missive, “I can’t discuss this now. Driving and facebooking is not safe! Haha.”

A text message can wait, your life cannot.

Be aware. Drive safe.

 

Bill Daniels is a trial lawyer and shareholder with the law firm of DANIELS LAW in Sherman Oaks, CA.  A graduate of Loyola Law School of Los Angeles, he is a former member of the Consumer Attorneys Association of Los Angeles Board of Governors, a founding member of Loyola’s Civil Justice Program and a past president of the Encino Lawyers Association.  Since 2007, he has been named a Southern California “Super Lawyer” by Los Angeles Magazine.  Mr. Daniels focuses his practice on serious personal injury, insurance and employment. For information, visit our website at www.daniels.legal or contact us through e-mail: Info@danielslaw.com.

Preventable medical error may cost US $1.32 trillion per year

The Journal of Patient Safety reports in its September 2013 issue that premature deaths associated with preventable harm to patients is now estimated at around 440,000 per year.1  Serious harm, the journal reports, “seems to be 10 to 20 fold more common than lethal harm.”

So, let’s talk in terms Americans understand: Dollars.

Using a formula published in the Journal of Health Care Finance, death due to preventable medical errors has an economic impact averaging $75,000 to $100,000 per year for an average of ten years ($750,000-$1million).2

Using that measure, preventable medical error deaths now cost the US economy between $330-440 billion per year.

To give some perspective, Stephen Friedman, a senior White House official, left government in 2002 after irking his colleagues by publicly estimating that the Iraq war could end up costing up to $200 billion, total.3

The term “serious harm” is not defined in the Journal of Patient Safety article. But in a bulletin published by one state’s medicaid administrator, serious preventable events include such things as (1) surgery performed on the wrong body part; (2) surgery performed on the wrong patient; (3) wrong surgical procedure performed on a patient; (4) unintended retention of a foreign object in a patient after surgery or other procedure; (5) patient death or serious disability directly attributable to an intravascular air embolism that occurs while being cared for in a health care facility; (6) patient death or serious disability directly attributable to a hemolytic reaction due to the administration of ABO/HLA-incompatible blood or blood products; (7) hospital-acquired pressure ulcers (decubitus ulcers) – stage 3 and 4; (8) hospital-acquired catheter associated urinary tract infections; (9) hospital-acquired vascular catheter – associated infection; (10) hospital-acquired mediastinitis after coronary artery bypass surgery; (11) falls and trauma (hospital acquired) – fractures, dislocations, intracranial injuries, crushing injuries.4

If serious harm events occur 10 to 20 times more frequently than deaths and are valued at one-tenth as much for economic impact, then the annual economic cost from preventable medical error causing serious harm is $330-860 billion.

Using that measure, we are looking at an annual cost to the US economy from deaths and serious harm caused by preventable medical error of $660 billion to $1.32 trillion per year, or 3-8% of the estimated US 2013 GDP.

Again, for perspective, the total annual cost of US healthcare in 2011 was $2.7 trillion or 17.9% of GDP.5

1  A New, Evidence-based Estimate of Patient Harms Associated with Hospital Care, J. Patient Saf., vol. 9, no. 3, September 2013.

2 The Economics of Health Care Quality and Medical Errors, J. Health Care Finance, 2012 Fall; 39(1):39-50, Andel, Davidow, Hollander, Moreno.

3  Washington Post, Iraq, Afghan wars will cost $4 trillion to $6 trillion, Harvard study says (Mar. 28, 2013).

4  Guidance Regarding Serious Preventable Events – approved May 2008, https://www.bcbsal.org/providers/adverseEvents/AlaHAGuidelines.pdf

5 National Health Expenditures 2011 Highlights, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/highlights.pdf

Bill Daniels is a trial lawyer and shareholder with the law firm of DANIELS LAW in Sherman Oaks, CA.  A graduate of Loyola Law School of Los Angeles, he is a former member of the Consumer Attorneys Association of Los Angeles Board of Governors, a founding member of Loyola’s Civil Justice Program and a past president of the Encino Lawyers Association.  Since 2007, he has been named a Southern California “Super Lawyer” by Los Angeles Magazine.  Mr. Daniels focuses his practice on serious personal injury, insurance and employment. For information, visit our website at www.daniels.legal or contact us through e-mail: Info@danielslaw.com.