Expert Affidavits in South Carolina -- New Rules, New Guidance

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1 Volume IX - Issue 2 - Summer Expert Affidavits in South Carolina -- New Rules, New Guidance 02 Basking in Georgia s Sunshine -- Laws that is 03 Spotlight on: Education Law & Litigation 04 Lost in Translation: Electronic Medical Records, HIPAA, and Litigation Expert Affidavits in South Carolina -- New Rules, New Guidance 05 Firm News & Notes By: David W. Overstreet & Tyler P. Winton 06 Southern General v. Wellstar and McReynolds v. Krebs: Did the Safe Harbor Provision Survive? 10 Recent Victories 11 Publications & Presentations Editorial Staff Eric Frisch, Partner efrisch@carlockcopeland.com Kari Hilyer, Marketing Manager khilyer@carlockcopeland.com To request additional copies or to edit your subscription information, contact info@carlockcopeland.com. To receive the Carlock Copeland Newsletter via , send your name and company information to info@carlockcopeland.com. The CCS Quarterly Newsletter is a periodic publication of Carlock, Copeland & Stair, LLP, and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult counsel concerning your own situation and any specific legal questions you have. Since July 1, 2005, South Carolina has required a plaintiff to file an expert affidavit along with the complaint when there are allegations of professional negligence against an attorney, architect, professional engineer, physician or other professional licensed by or registered with the State of South Carolina. In the affidavit, the expert witness is required to specify at least one negligent act or omission claimed to exist and the factual basis for each claim based on the evidence available at the time of filing. If a party does not comply with the statute, they run the risk that the complaint will be dismissed for failure to state a claim. However, there has been little appellate guidance on the statute until May 2, 2012, when the South Carolina Supreme Court issued an opinion in the case of Grier v. Piedmont Medical Center regarding what the expert must say in their affidavit to avoid dismissal of the claim. In Grier, the plaintiff submitted an affidavit with their complaint. The defendant moved to dismiss on the grounds that the affidavit did not contain an opinion on proximate cause. The trial court agreed and plaintiff appealed. On appeal, plaintiff argued that the trial court erred in ruling that the statutes require plaintiff to lay out a causation opinion in the affidavit. The Supreme Court agreed, reversing and remanding for further proceedings. The South Carolina Supreme Court issued an opinion on May 2, 2012, in the case of Grier v. Piedmont Medical Center regarding what an expert must say in their affidavit to avoid dismissal of a professional negligence claim. 1

2 Continued from page 1 The Court began its analysis by examining the Section (B), which states the plaintiff has to submit an affidavit of an expert witness which must specify at least one negligent act or omission claimed to exist and the factual basis for each claim based on the available evidence at the time of the filing of the affidavit. The Court held that the statutory language that the affidavit must specify at least one negligent act or omission means that the expert must opine on the breach element of a common law negligence claim, not causation. Consequently, the Court concluded that a plaintiff must only submit an affidavit setting forth an opinion about the alleged breach of the standard of care to state a claim....plaintiffs may try to advance a similar rationale to support a position that a plaintiff need not file an expert affidavit alleging causation or damages... The defendant argued that one of the major goals behind the tort reform legislation, such as Section , is to curtail frivolous litigation by ensuring plaintiffs only present colorable claims. The Court rejected this argument, reasoning that it was in no position to look beyond the plain language of the statue and read into it a requirement that the expert also opine as to the causation at [that] stage in the proceedings. Given the Court s opinion in Grier, plaintiffs may try to advance a similar rationale to support a position that a plaintiff need not file an expert affidavit alleging causation or damages, which unfortunately may now reduce the likelihood of some cases being dismissed for failure to state a claim. David W. Overstreet Partner, Charleston Office Commercial Lititgation General Liability Health Care Litigation doverstreet@carlockcopeland.com Tyler P. Winton Associate, Charleston Office Construction Litigation twinton@carlockcopeland.com Basking in Georgia s Sunshine --- Laws, that is By: Marquetta J. Bryan & Thomas A. Cox A day at the pool, a walk in the park and that magnificent ray of golden light leaves no question that we are in the midst of an enjoyable, yet often infamous, Georgia summer. With its long days and warm weather, summer offers endless opportunities to simply bask in the open sunshine. In a fitting pre-welcome for the season, Governor Nathan Deal, on April 17, 2012, reinforced Georgia s commitment to open government and signed House Bill 397, which makes several substantial changes to Georgia s Sunshine Laws - the Open Meetings Act (O.C.G.A through 6) and the Open Records Act (O.C.G.A through 76). Effective immediately, the new legislation clarifies and increases the responsibilities of public officials and entities covered by those laws, increases penalties for noncompliance, and aims to make those laws more easily understood by government officials and the public alike. The revisions to existing law are fairly extensive and this article will only mention some of the more notable ones. The Open Meetings Act has been amended in the following ways: The definition of meeting is modified so that it now consists of any gathering of a quorum of an agency s governing body at which any business, policy, or public matter of the agency is formulated, presented, discussed, or voted upon. O.C.G.A (a)(3)(A). The new law clarifies that all votes, except votes to authorize settlement of matters in litigation and preliminary votes on real estate transactions, must be taken in public. O.C.G.A (b); (b)(1). The Act clarifies that, except when a vote is unanimous, the minutes of a meeting must identify those who second motions and those voting for or against proposals and motions. O.C.G.A (e)(2)(B). Moreover, minutes must be kept of executive sessions, even if they are not to be made public. O.C.G.A (e)(2)(C). Resolving an issue in some dispute, the new law expressly excludes from the definition of a meeting the communications between members of an agency s governing board, although such s are most likely open for inspection under the Open Records Act. O.C.G.A (a)(8). The Act now allows governing boards to conduct closed session interviews when seeking to fill the position of head of the agency in question. O.C.G.A (b)(2). The Act increases the penalty from $500 to 2

3 $1,000 for first violations and to $2,500 for subsequent violations within the same 12-month period. It also authorizes penalties in civil actions for negligent violation of the law. O.C.G.A Spotlight on... The changes in the Open Records Act were not as significant, but include: The Act now clarifies the Georgia law related to disclosure of records covered by the privacy provisions of the federal FERPA statute (Family Educational Rights and Privacy Act, 20 U.S.C. 1232g) by exempting from disclosure any record that would not be subject to disclosure, or the disclosure of which would jeopardize the receipt of federal funds, under FERPA. The new law makes several public friendly changes in how, and how much, requesting persons may be required to pay for records produced in response to an Open Records request. It caps the cost per page an agency may impose at 10 for letter sized pages, which represents a decrease from 25. O.C.G.A (c)(2). Agencies who are asked for records are required to estimate costs to the requester where costs are expected to be over $25, but the agency may not demand prepayment before beginning its search unless it estimates the cost of production to exceed $500. O.C.G.A (e). The Act clarifies that data and data fields now fall within the definition of public record, and that electronic records and data are subject to mandatory disclosure upon request under the Open Records Act. O.C.G.A (b)(2), (c). Penalties for violating the Open Records Act are increased from $100 to $1,000 for the first violation and to $2,500 for subsequent violations within a 12-month period. The Act also authorizes penalties in civil actions for negligent violation of the law. O.C.G.A If you have any questions about Open Records or Open Meetings laws in Georgia, please contact Tom Cox or Marquetta Bryan. In the meantime, enjoy the sunshine. Marquetta J. Bryan Partner, Atlanta Office Commercial Litigation General Liability mbryan@carlockcopeland.com Thomas A. Cox Of Counsel, Atlanta Office Commercial Litigation tcox@carlockcopeland.com Under the leadership of Thomas A. Cox, whose understanding of the specialized legal and litigation needs of public school systems, private schools and higher education institutions has been formed over a 35-year career in education law, Carlock Copeland and its attorneys are prepared to provide schools and school systems with counsel on sensitive issues such as student rights, services to students with disabilities, employment matters, and open records issues, as well as a full range of litigation capabilities when disputes cannot be avoided. Additionally, the Firm is a Local Board Governance Training Provider which allows us to provide training for local school board members throughout the state of Georgia. Carlock Copeland also provides advice and representation on more general matters affecting educational institutions, ranging from construction disputes, to federal and state law compliance, to the resolution of contract disputes. EDUCATION LAW & LITIGATION The business of a public school system, and sometimes that of private schools as well, can become a very public affair. Our attorneys are accustomed to working in highly charged environments in which residents, parents, politicians and the media all have vested interests in both processes and case outcomes. Tom Cox, our Education Law & Litigation team leader, is widely recognized for his expertise in education law, having practiced in the area his entire career and having taught courses in Education Law and Policy as an Adjunct Professor at Emory University Law School. Tom s extensive education law background includes the litigation of state and federal constitutional claims (he has most recently represented the school boards of Atlanta and DeKalb County in a successful lawsuit contesting the constitutionality of the state s charter school commission law); special education litigation (he represented the Fulton County School District in the first special education hearing ever held in the state of Georgia); and public school funding (he has represented both plaintiffs and state defendants in lawsuits involving state constitutional claims of inadequate educational funding). Joining Tom on the Education Law & Litigation team are Lynn Blasingame Olmert, Renee Y. Little and Marquetta J. Bryan. Our commitment as a firm is providing our educational institution clients, both public and private, with solid strategic analysis and sound litigation solutions based on a deep understanding of the educational system and its unique issues and challenges legal and otherwise. 3

4 Lost In Translation: Electronic Medical Records, HIPAA and Litigation By: R. Christina Wall In February 2009, Congress enacted the Health Information Technology for Economic and Clinical Health (HITECH) Act, for the purpose of improving the electronic exchange of health information via health information technology (HIT). Additionally, the Healthcare Insurance Portability and Accountability Act of 1996 (HIPAA) provides specific rules regarding the disclosure of protected health information (PHI). Healthcare professionals must be aware of the risk management issues created by the cross-requirements of HIPAA and HITECH, including how the electronic medical record (EMR) will be viewed and interpreted in the event of litigation. Since the enactment of HIPAA in 1996, there have been wide-ranging applications of its provisions in the litigation setting. Particularly in Georgia, the manner in which we obtain medical records in civil cases where a plaintiff has put his or her health in issue has been affected. Where we previously would send a simple request for records to a non-party healthcare provider, we now must provide satisfactory assurances that we have given notice to the patient of the request and allowed the opportunity for the patient to object, for example. We now enter into HIPAA agreements with potential expert witnesses, specifying that protected health information will not be disseminated and will be properly destroyed at the end of litigation. These protections exist for all patients and should be closely adhered to by all concerned. In fact, HIPAA provides for significant civil fines and penalties for breaches of its provisions. Now, as healthcare providers increasingly use electronic medical records, we must be aware of the interplay between the EMR and litigation. As an initial matter, what is HITECH and why is it important? HITECH was enacted as part of the American Reinvestment and Recovery Act (ARRA). HITECH is, in essence, a means of promoting the use of electronic medical records. HITECH amended the Public Health Service Act (PHSA) with the purpose of improving healthcare quality, safety and efficiency through the promotion of health information technology for the exchange of health information electronically. As to the enactment of HITECH as part of the ARRA, Title IV of Division B of ARRA amends Titles XVII and XIX of the Social Security Act by creating incentive payments to eligible providers to promote the adoption of the use of electronic medical records via health information technology. Thus, the use of EMRs is a key requirement for healthcare providers to become meaningful users eligible for payment under the Medicare and Medicaid electronic medical record incentive programs. As we wade through new developments in litigation, we are likely to see an increase in the use of forensic computer analysis of data and metadata to track exactly when something was documented and by whom. HITECH actually increases HIPAA fines and penalties for civil violations, making it imperative for healthcare providers to ensure compliance by use of enhanced security in maintaining electronic medical records. Similarly, the entities to whom healthcare providers appropriately (in compliance with HIPAA) disseminate PHI need to take steps to ensure they are adequately protecting confidential health information. For example, individuals who can access medical records on an iphone or ipad should use a password on their device. This is a simple measure at a most basic level. Obviously there are far more sophisticated tools and means of protecting electronic PHI on company and/or law firm computer networks, and all necessary measures should be utilized. For healthcare providers, it is imperative that appropriate security measures are in place to protect information and ensure compliance with HIPAA and avoid the substantial penalties imposed by HITECH for willful neglect in violating HIPAA. Since 2005, healthcare providers have been required to have a documented assessment of all technical, administrative and physical safeguards for PHI, per the HIPAA Security Rule. HITECH expands this rule to include business associates of healthcare providers. Any weakness detected in the safeguards for PHI should be noted and a plan developed and implemented to address the concern. A covered entity should be able to demonstrate a good faith effort at compliance with HIPAA requirements. HITECH also adjusts how patient information can be used 4

5 by healthcare providers. Patient PHI cannot be sold in violation of HIPAA. An organization cannot use a patient s information to solicit contributions for fundraising purposes, under HITECH, unless the patient has been given notice in conspicuous type that includes a toll free number and address for a patient to opt out of receiving any such fundraising material. HITECH also narrowed the definition of marketing, such that providers may only use patient information for limited purposes such as educating a patient about a product that is specifically related to that patient s treatment (rather than general marketing to encourage a patient to purchase a product). The Department of Health and Human Services, under HITECH requirements, must now periodically audit healthcare providers and business associates to ensure compliance with HIPAA. This may lead to the imposition of more penalties, even for unintentional violations. Thus, all parties in the HIPAA-HITECH arena need to be aware of the requirements and actively involved in assuring compliance within their organizations. From a litigation perspective, just as HIPAA changed the way records are obtained in the context of a lawsuit, HI- TECH and the EMR will change the way records are reviewed, interpreted and litigated in a lawsuit. With the advent of the EMR, we can anticipate some litigation practice positives--easier to read the doctor s notes, for example. But we can also anticipate mistakes in marking through a template to create the record, difficulty in determining the actual time of the note depending on the program utilized by a particular practice or hospital, and questions of when a report was seen or signed if the program does not have a way of recording an electronic signature (with date/time) on the report. As we wade through these new developments in litigation, we are likely to see an increase in the use of forensic computer analysis of data and metadata to track exactly when something was documented and by whom--and who has subsequently accessed or viewed the document. For risk management purposes, this adds a layer to the consideration of what type of program to utilize, and how to manage access and track changes. R. Christina Wall Partner, Atlanta Office General Liability Health Care Litigation cwall@carlockcopeland.com Firm News & Notes Carlock, Copeland & Stair Attorneys Selected for South Carolina Super Lawyers and Rising Stars We are proud to announce that five of our lawyers have been selected for inclusion on the South Carolina Super Lawyers and Rising Stars lists for Super Lawyer Kent T. Stair focuses his practice on the representation of design professionals in the drafting and negotiation of their contracts, the resolution of design and construction phase issues, and the litigation, arbitration and mediation of the various disputes that arise in connection with the design and construction process. His practice also involves the representation of other parties to the construction process, including large general contractors in complex cases alleging construction defects. The non-construction part of his practice involves the representation of attorneys, when they are sued in connection with their professional activities. When not litigating on someone s behalf, Kent has served as a mediator for others in over 150 cases. Kent was also named to the list of South Carolina Super Lawyers in 2008, 2009, 2010, and Additionally, he has also been an honoree on he Georgia Super Lawyers list for the past nine years. In 2008, 2009, and 2010, he was honored on the Georgia Super Lawyers list as one of the top 100 attorneys in the state. Only five percent of the lawyers in the state are named by Super Lawyers. The selections for this esteemed list are made by the research team at Super Lawyers, which is a service of Thomson Reuters. Each year, the research team at Super Lawyers undertakes a rigorous multiphase selection process that includes a statewide survey of lawyers, independent evaluation of candidates by the attorney-led research staff, a peer review of candidates by practice area, and a good-standing and disciplinary check. News & Notes continued on page 7 5

6 Southern General v. Wellstar and McReynolds v. Krebs Did the Safe Harbor Provision Survive? By: Jason W. Hammer The dilemma in the wake of Southern General v. Holt 1 and its progeny, specifically the Supreme Court decision in Frickey v. Jones, 280 Ga. 573 (2006), has been that when faced with a demand for policy limits, an insurer could not accept the demand and request satisfaction of pending hospital liens without arguably countering / rejecting the demand. This left insurers weighing the lesser of two evils - a potential bad faith claim or a claim by the hospital for failure to satisfy the liens. Ultimately, this created two scenarios in which the insurer could be obligated to pay an amount beyond the limits of the policy. If the insurer did everything right with respect to the Holt demand and settled with the plaintiff for policy limits, it may still be statutorily obligated to satisfy the hospital liens (assuming the hospital did not consent to the settlement). If the insurer followed the statutory scheme for satisfaction of the hospital lien and either paid the lien directly, or insisted that the hospital be a party to the settlement, the Holt demand would not be met and the insurer may be exposed to bad faith. On March 20, 2012, the Georgia Court of Appeals took a significant step that seemingly resolved this dilemma when they issued their opinion in Southern General Insurance Co. v. Wellstar Health Systems, Inc., 2012 WL (Ga.App.). In short, the Court set forth a roadmap for insurers to meet a Holt demand while still requesting a reasonably and narrowly tailored provision assuring that the plaintiff will satisfy any hospital liens from the proceeds. The Court held that if the plaintiff unreasonably refused to give the requested assurance, the insurer may then satisfy the lien directly with the hospital and tender any remaining funds to the plaintiff, without being in bad faith. According to the Court of Appeals, such a request could not, as a matter of law, be in bad faith and following this procedure created a safe harbor for the insurer. With what appeared to be a resolution to this issue in place, it took only three days for the waters to be muddied again. On March 23, 2012, the Georgia Supreme Court issued their opinion in McReynolds v. Krebs, 2012 WL (Ga.). In short, the Court held that a motion to enforce a settlement agreement was properly denied when in response to a Holt demand, the insurer, while agreeing to meet the demand, asked for a phone call to discuss how the pending hospital lien would be resolved as part of the settlement. The Krebs Court found that request to be a counteroffer and therefore a rejection of the Holt demand. The Supreme Court makes no mention of Wellstar and it is not even clear from the opinion whether or not they were aware of it. 2 So how can we resolve these seemingly conflicting appellate decisions issued in the same week? This article is an analysis of the two decisions and a look at one perspective on how they can perhaps be reconciled in a manner that salvages the safe harbor provision created by Wellstar. Southern General v. Wellstar In September of 2007, Norman Gray was riding a bicycle when he was struck by a Southern General insured with a minimum limits policy of $25,000. Mr. Gray incurred over $22,000 in medical expenses with Wellstar. In October of 2007, Wellstar notified Southern General and Mr. Gray of its intent to file liens and subsequently filed them the following month. Before the liens were filed, however, Southern General tendered its limits to Mr. Gray and indicated that either Wellstar s liens had been discussed and Southern General had confirmation that the liens would be satisfied, or there would be an indemnification agreement prior to issuing the funds. In response to the tender, Mr. Gray sent Southern General a demand for policy limits with a 5-day time limit. The funds were tendered and a release was executed that omitted any indemnification regarding the outstanding lien, and presumably did not include any provision that Mr. Gray would satisfy the lien (the opinion does not specify either way). Wellstar filed suit against Southern General to enforce their hospital liens pursuant to O.C.G.A (a). 3 Southern General moved for summary judgment, arguing that the settlement was made in compliance with a time-limited demand and that Holt and Frickey were irreconcilable with the statutory scheme for satisfaction / enforcement of hospital liens. 4 The trial court denied Southern General s Motion, ruling that the tender of limits in response to a time-limited demand is not a defense to enforcement of a hospital lien. The trial court found that if Southern General had paid the hospital lien, Mr. Gray would still have had the full benefit of the insurance proceeds he demanded. The trial court granted summary judgment to Wellstar sua sponte and the Court of Appeals affirmed the trial court s order in its entirety. The Court of Appeals analysis starts by walking through an insurer s obligations in responding to a time-limited settlement demand within the policy limits, and its obligations with respect to satisfaction of pending hospital liens. The Court notes that the question before us is whether an insurance company s common law and statutory duties are reconcilable under the law, and we agree with the trial 6

7 court that they are. [The Court of Appeals] concludes that it is possible for an insurance company to create a safe harbor from liability under Holt and its progeny when (1) the insurer promptly acts to settle a case involving clear liability and special damages in excess of the applicable policy limits, and (2) the sole 5 reason for the parties inability to reach a settlement is the plaintiff s unreasonable refusal to assure the satisfaction of any outstanding hospital liens. Firm News & Notes South Carolina Super Lawyers continued from page 5 Carlock, Copeland & Stair Attorneys Selected for South Carolina Super Lawyers and Rising Stars Rising Stars To explain its reasoning, the Court sets forth a hypothetical scenario where an insurer, faced with clear liability and special damages in excess of policy limits, offers in a timely fashion to tender its limits to the plaintiff, subject to a reasonably and narrowly tailored provision assuring that the plaintiff will satisfy any hospital liens from the settlement proceeds. The Court even suggests an example of what would constitute such a reasonable and narrowly tailored provision: The insurance company could request that plaintiff s counsel or a third party hold a portion of the settlement proceeds (in an amount equal to that of the hospital lien) in escrow to allow the plaintiff an opportunity to investigate the validity of the liens and to negotiate with the hospital. And once the relevant lien-resolving documents have been executed by the parties, the held-back settlement funds could then be disbursed to the plaintiff. The Court held that if an insurer made such an offer, or made the request as a timely counteroffer to a Holt demand, and the plaintiff unreasonably refused to give the requested assurance, the insurer is (at that point) under no obligation to tender policy limits directly to the plaintiff. (emphasis added). Then the insurer would be free to simply verify the validity of any liens, make payment directly to the hospital, and then disburse any remaining funds to the plaintiff. The Wellstar Court is careful to note, however, that this scenario in no way condones or encourages the insurer satisfying the liens before engaging in good-faith settlement negotiations with the plaintiff. Assuming the scenario above is followed by the insurer, the Court of Appeals held that the insurer would create a safe harbor from liability under Holt and its progeny. In such a scenario, when the failure to settle a Holtscenario claim is based solely on the plaintiff s unreasonable refusal to agree to a reasonably and narrowly tailored provision assuring that any hospital liens will be satisfied from the settlement proceeds, that cannot, as a matter of law, constitute a bad faith failure to settle From left: David W. Overstreet, Amanda K. Dudgeon, Jackson H. Daniel, Michael B. McCall David W. Overstreet is a partner in the Charleston office who focuses his practice on commercial litigation. A significant amount of his time is spent defending professionals, including lawyers, accountants, real estate agents, and others. A smaller portion of his practice includes handling general liability matters with sizeable exposure. Amanda K. Dudgeon is a member of the Charleston office s commercial litigation team and focuses her practice on the defense of attorneys, appraisers, real estate agents, accountants, and other professionals. She also handles director and officer claims and construction defect matters. Jackson H. Daniel focuses his practice primarily on Construction Litigation. He has a significant amount of trial experience, much of it obtained during his four years of prosecuting criminal offenses in South Carolina. Michael B. McCall practices primarily in the areas of legal and accounting malpractice, premises and products liability, and insurance coverage. Mike has a significant amount of trial experience defending personal injury claims in state and federal courts throughout South Carolina, including over 75 cases tried to verdict. This is the first year that Rising Stars have been selected for South Carolina. Rising Stars is a listing of exceptional lawyers who are 40 years of age or under, or who have been practicing for 10 years or less, and have attained a high degree of peer recognition and professional achievement. Only 2.5 percent of the total lawyers in the state are honored on the Rising Stars list. 7

8 when the insurer is merely attempting to comply with its legal obligations. (emphasis added). Grady Memorial Hospital) will be resolved as part of this settlement. In short, the Court of Appeals held that refusal to settle for policy limits in the absence of plaintiff s agreement to satisfy the hospital liens is not, as a matter of law, an unreasonable refusal, as required to trigger a claim for bad faith. Interestingly, the Court of Appeals commented that when Gray demanded Southern General s policy limits without also agreeing to assure satisfaction of Wellstar s hospital liens, Southern General was effectively faced with a settlement demand in excess of its policy limits. Although the Court of Appeals does not take this next step, it could be argued based on this language that a Holt demand for policy limits without an offer to satisfy a hospital lien is not a Holt demand at all, as it is effectively a demand in excess of the limits and does not provide an opportunity to settle the case within the limits of the policy. There are a few subtleties in Wellstar worth noting. The holding of this case is exclusive to hospital liens and the Court s reasoning is based on the statutory scheme specific to hospital liens and the obligations on insurers created thereby. It would be unwise to rely on Wellstar in the face of a Holt demand to insist that other types of liens or obligations be satisfied by the plaintiff. Moreover, Wellstar provides for satisfaction of hospital liens, but makes no comment on indemnity protection for those liens. Wellstar does not appear to provide any authority to insist on indemnity protection for claims arising out of or relating to enforcement of hospital liens. Additionally, the Court makes multiple references in this case to Holt demands only being applicable to cases of clear liability where the special damages exceed the policy limits. In fact, the Court uses italics almost every time it uses the word exceed. However, it should not be assumed that the law necessarily precludes a bad faith claim in a case where the special damages do not exceed the policy limits. McReynolds v. Krebs Carmen McReynolds was the driver of a vehicle that struck a General Motors vehicle on I-75, in which Lisa Krebs was a passenger. Krebs brought suit against McReynolds and GM. McReynolds filed a crossclaim against GM, the results of which are significant for the apportionment discussion, but not relevant to the Wellstar analysis. Krebs made a policy limits demand to McReynolds s insurer on September 6, On September 1, 2005, the insurer responded in part as follows: This fax will confirm receipt of your letter dated 8/24/05 in which you made a demand for the bodily injury limits available under [the] policy... Our limits are $25,000/$50,000 and we agree to settle this matter for the $25,000 per person limit. Please call me in order to discuss how the liens (specifically, but not limited to the $273, lien from A subsequent letter from the insurer indicated that it tendered its full policy limit of $25,000 to Ms. Krebs, subject to liens. The trial court, relying on Frickey, ruled that this language of the insurer s September 1, 2005 response was not an unequivocal acceptance of the demand because it was conditioned on the resolution of the hospital lien. Therefore, the trial court denied McReynolds s Motion for Summary Judgment as to the enforceability of the lien, and the Court of Appeals affirmed with little discussion beyond citation to Frickey. McReynolds v. Krebs, 307 Ga.App. 330 (2010). The Supreme Court granted certiorari to answer the question, Did the Court of Appeals correctly find that McReynolds s insurer made a counteroffer in response to Krebs s settlement demand?, which they answered in the affirmative. The Supreme Court s reasoning tracked Frickey and the Court placed great emphasis on the as part of this settlement language of the September 1, 2005 fax. The Court noted that under Frickey, the resolution of... actual and potential liens of health care providers will transform a purported acceptance into a counteroffer, as it is an added condition. The Supreme Court makes no reference whatsoever to the Wellstar decision. Can They Be Reconciled? So what are we to make of Wellstar in the wake of McReynolds? Outwardly, McReynolds seemed a logical opportunity for the Supreme Court to either endorse or disapprove of the safe harbor provision created by Wellstar. With no comment either way, we are left wondering whether or not the safe harbor provision survived. The following is an argument that it did, but one that should be viewed with caution. Perhaps a look at what the McReynolds Court did not say is more helpful than what it did. McReynolds is not an opinion about bad faith. In fact, the term bad faith never appears in the Court of Appeals or Supreme Court decisions. McReynolds was about offer and acceptance - basic contract law. Although McReynolds affirmed the Frickey holding that responding to a Holt demand agreeing to pay the limits, but also inquiring into the satisfaction of liens as part of the settlement, constitutes a counteroffer / rejection of the demand, the Court did not go the next step in holding that such a counteroffer / rejection of the demand is made in bad faith (or even that it creates a jury question of bad faith). Bad faith was not an issue before the Court in McReynolds, nor was it at issue 8

9 in Frickey. Perhaps this explains the McReynolds Court s silence on Wellstar. On the other hand, Wellstar clearly addressed bad faith and is the only case that analyzes whether or not such a response to a Holt demand constitutes bad faith - concluding that it does not. Reading McReynolds and Wellstar together in this light arguably leads to this conclusion: If a plaintiff makes a Holt demand in a case with a pending hospital lien and the insurer accepts the demand, but requests a reasonably and narrowly tailored provision assuring that the plaintiff will satisfy any hospital liens from the proceeds, that constitutes a counteroffer / rejection of the Holt demand pursuant to Frickey and McReynolds. However, pursuant to Wellstar, such a counteroffer / rejection is not unreasonable and therefore, not bad faith as a matter of law. All that being said, this argument should be approached with caution, particularly since McReynolds is a Supreme Court case and Wellstar is a Court of Appeals decision. Plaintiffs attorneys will certainly argue that McReynolds overruled Wellstar, even if not expressly. A motion for reconsideration citing Wellstar was filed in the McReynolds case and it was denied by the Supreme Court. Presumably, if the Supreme Court viewed these two cases as inconsistent it would have taken that opportunity to comment on Wellstar one way or the other, particularly in light of Justice Melton s dissenting opinion, in which he distinguished Frickey. For the time being, it appears insurers have an argument that addressing hospital liens in response to a Holt demand is not bad faith as a matter of law, although the dust continues to settle. Resources 1. Recognizing the potential confusion caused by Southern General being the plaintiff in both the Holt case and the Wellstar case, this article refers to Southern General v. Holt as the Holt case and Southern General v. Wellstar as the Wellstar case. 2. Significantly for insurers, but not relevant to this article, the Supreme Court in Krebs held in a separate division that liability may be apportioned among defendants in the absence of plaintiff s negligence pursuant to O.C.G.A Southern General filed suit against Mr. Gray seeking indemnity, which was resolved by default judgment against Mr. Gray. The viability of Southern General s third-party claim against Mr. Gray is not addressed in the opinion. 4. Southern General also made a constitutional equal protection argument, which was not addressed on appeal. 5. The Court of Appeals italicized sole, which should not be lost on anyone. It is repeated throughout the opinion. Jason W. Hammer Associate, Atlanta Office General Liability Health Care Litigation jhammer@carlockcopeland.com Firm News & Notes CCS Partner Honored as a Charleston Forty under 40 David Overstreet, Partner in the Charleston office of Carlock, Copeland & Stair, has been honored with the Charleston Regional Business Journal s Forty under 40 Award. This annual award honors the professional successes and community involvement of forty people younger than 40 years of age who are making their mark on the region s business community. All 40 winners were interviewed and featured in the Charleston Regional Business Journal published on March 26, Carlock, Copeland & Stair Attorneys Join Claims And Litigation Management Alliance Carlock, Copeland & Stair, LLP is pleased to announce that Adam L. Appel and David J. Harmon have accepted nominations to join the prestigious Claims and Litigation Management Alliance (CLM). The CLM is an alliance of insurance companies, corporations, corporate counsel, litigation and risk managers, claims professionals and attorneys. CLM s goal is to promote and further the highest standards of litigation management in pursuit of client defense. Attorneys and law firms are extended membership by invitation only based on nominations from CLM Fellows, in-house claims professionals. Carlock, Copeland & Stair Welcomes New Executive Director We are pleased to announce that Roger P. Flower has joined the firm as Executive Director. Roger will oversee all business activity for both the Atlanta, GA and Charleston, SC offices. Roger brings over 25 years of legal administration experience to Carlock, Copeland & Stair. Immediatly prior to joining Carlock, Copeland & Stair, Roger was employed by one of the 75 largest law firms headquartered in the U.S. Stay tuned for an interview with Roger, which will be published in the Fall 2012 Newsletter. 9

10 We re in this to win. Motion to Dismiss Granted in Legal Malpractice Action Sarah Wetmore and Andy Countryman obtained a dismissal with prejudice of a legal malpractice action in South Carolina state court. The Plaintiff maintained that a Charleston lawyer and his firm wrongly deprived the Plaintiff of the opportunity to participate in the settlement of a lawsuit arising out of his minor child s death in which the lawyer represented the child s mother. The Court held that the Defendants were immune from liability to the Plaintiff because they never represented him. The Court also determined that the Plaintiff failed to file the requisite expert affidavit and to plead the proper elements of an Unfair Trade Practices Act cause of action. Andy Countryman argued the Motion on May 9, 2012, in Marion, South Carolina in front of Judge Anthony Russo. Defense Verdict for a Chiropractor in Medical Malpractice Case Partners Chip Emge and David Harmon obtained a defense verdict for a chiropractor on April 20, 2012, in Charleston County, South Carolina. The Plaintiff alleged that she had suffered a herniated disk as the result of a complimentary chair massage given at a community event. At issue was the ability of a chair massage to produce enough force to cause a disk herniation as well as whether it was the chiropractor or his massage therapist who had actually attended the event on behalf of the practice group. The Plaintiff sought $5 million in damages. After a five day trial, the jury found in favor of the chiropractor as well as the practice group. Dismissal Obtained for Engineering Firm in Death Case Paul Sperry and Andy Countryman obtained a dismissal of a wrongful death/survivorship action filed against a Myrtle Beach engineering firm in South Carolina state court. The Plaintiff sustained injuries that led to her death when she was involved in a car accident while on vacation in Myrtle Beach in The Complaint alleged the Defendant engineering firm negligently designed the intersection where the accident took place, which caused the accident. The Court dismissed the Complaint based on the Plaintiff s failure to file the requisite expert affidavit against the Defendant engineer. The Plaintiff asked for more time to file the affidavit because it had retained an expert and was in the process of obtaining an affidavit. However, the Court denied the request and dismissed the Complaint. Andy Countryman argued the Motion in Conway, South Carolina in front of Judge Larry Hyman on April 18, Partial Summary Judgment Affirmed in Legal Malpractice Case Michele Jones and Joe Kingma represent a lawyer who allegedly gave bad advice in an employment matter. The Plaintiff claimed that based on the advice, he quit his job, enrolled in law school, moved away from his family, and borrowed money to pay expenses. Michele and Joe moved for summary judgment, which the trial court granted in large part, including dismissing claims for emotional distress, attorney s fees, and punitive damages. The Court sharply limited the damages that the Plaintiff might recover. The Court of Appeals of Georgia affirmed the holding that the Plaintiff could not recover any damages related to attending law school, because the defendant lawyer did not proximately cause those alleged damages. The Court of Appeals described the Plaintiff s claim, that a lawyer must pay to remake a client s life, as preposterous. Defense Verdict for a Surveying Company in South Carolina Partners Chip Emge and David Harmon obtained a defense verdict for a surveying company on March 7, 2012, in Charleston County, South Carolina. The surveyor was hired by the Plaintiff developer as part of the due diligence process for the purchase of a piece of commercial property. Unbeknownst to the surveyor, the seller had represented to the Plaintiff that the property was free of wetlands. The survey plat provided to the Plaintiff stated that it did not and was not intended to identify wetlands. When wetlands were subsequently discovered, the Plaintiff sued the surveyor claiming that the failure to locate wetlands was a breach of their contract and negligent. The Plaintiff sought in excess of $1 million in damages. The jury found in favor of the surveyor holding that the Plaintiff knew or should have known that the survey did not identify wetlands at the time it was provided to him but did not pursue its claims until after the statute of limitations had run. Summary Judgment Shoots Down Class Action Against Law Firm Lindsey Hettinger, John Rogers, and Joe Kingma obtained summary judgment in a putative class action suit against a law firm in the Southern District of Georgia. The Plaintiffs were referred to the law firm by a chiropractor after a 2005 car accident. The firm handled Plaintiffs personal injury claims and settled on their behalf. Plaintiffs filed a class action alleging professional negligence, fraud, and breach of fiduciary duty. They claimed the law firm wrongfully solicited them at the chiropractic clinic, engaged in a fee-sharing scheme with the clinic, and inadequately represented 10

11 And we do. their interests. The allegations included the suggestion of an unholy alliance between the firm and the chiropractor against the clients interests. Judge Lisa Wood granted the firm s motion for summary judgment on March 7, 2012, holding the Plaintiffs could show no damage. Summary Judgment for Automobile Owner in Dekalb County Superior Court Fred Valz, Erica Parsons and Beth Albright defended an insured automobile owner and his friend. A car thief stole the insured s vehicle and crashed into innocent motorists. The motorists filed suit against the insured and his friend, who were following the thief in another vehicle at time of the accident. The Superior Court, DeKalb County, entered summary judgment in favor of the insured owner and friend and the motorists appealed. The Court of Appeals affirmed the grant of summary judgment, ruling that the motorists presented no evidence showing that owner and friend breached any duty by following the car thief and that they presented no evidence of a causal connection between their following and the subsequent accident. The Supreme Court denied Plaintiffs Petition for Cert. Federal Court Grants Motion to Dismiss for Collections Law Firm Shannon Sprinkle, John Bunyan, and Joe Kingma won the dismissal of a federal action against a law firm that was retained to initiate foreclosure proceedings. The Plaintiff alleged that his promissory note and security deed were forged and that the collections law firm robo-signed the assignment of his security deed and failed to get govern- Publications & Presentations ment authorization before foreclosing. In dismissing the action, the U.S. District Court for the Northern District of Georgia concluded that none of these allegations stated a plausible claim for relief. Summary Judgment in Wrongful Death Case in the Superior Court of Laurens County Dave Root and Molly Gillis obtained summary judgment in their clients favor in a wrongful death case in the Superior Court of Laurens County. The Plaintiff was the son of the deceased, who was killed on the job when a tree fell on him. The deceased worked for the Defendants as a tree remover. The Plaintiff alleged that the Defendants failed to exercise ordinary care and other allegations of negligence. Dave Root and Molly Gillis successfully argued that the Workers Compensation Act (O.C.G.A ) barred Plaintiff from recovering against their clients. The judge granted the Defendants motion and the case was dismissed. Motion to Dismiss Granted in U.S. District Court for the Northern District of Georgia Brian Spitler, Michele Jones, and Joe Kingma won dismissal of claims against their attorney client in the U.S. District Court for the Northern District of Georgia. The Plaintiffs alleged that they lost their investments in a real estate company due to fraud. The Plaintiff investors sued various defendants, including the attorney who performed corporate legal work for the company. The court agreed that the Plaintiffs failed to state claims for securities fraud, fraudulent misrepresentation, unjust enrichment, false certification of financial statements, and civil RICO against the attorney. Partner Eric Frisch to present at Pediatrics by the Sea & Pediatric Coding Conference, hosted by the Georgia Chapter of American Academy of Pediatrics on June 13, 2012, at the Ritz Carlton in Amelia Island, GA. We will host our annual General Liability and Workers Compensation Seminar at Turner Field on Tuesday, June 26. For more information or to register, please contact Christina Walsh at cwalsh@carlockcopeland.com. Joe Kingma to present Don t Become a Defendant: Good Risk Management Will Help You Grow Your Practice to the Coastal Chapter of the South Carolina Association of CPA s on Thursday, June 21. Amy Urban and Dave Root are schedule to present at the 2012 Georgia Safety, Health and Environmental Conference. The conference will be held at the Savannah Marriott Riverfront Hotel on September 12-14, We will host our South Carolina Risk Management Seminar for Architects and Engineers on Friday, June 22. For more information or to register, please contact Christina Walsh at cwalsh@carlockcopeland.com. Please visit to obtain more information on our recent events, publications, and presentations. 11

12 Return To: Carlock, Copeland & Stair, LLP 191 Peachtree Street NE Suite 3600 Atlanta, Georgia In this Issue: Expert Affidavits in South Carolina -- New Rules, New Guidance Southern General v. Wellstar and McReynolds v. Krebs: Did the Safe Harbor Provision Survive? At a glance... CARLOCK, COPELAND & STAIR, LLP Atlanta Office 191 Peachtree Street NE Suite 3600 Atlanta, Georgia Phone Fax Charleston Office 40 Calhoun Street Suite 400 Charleston, SC Carlock, Copeland & Stair Welcomes New Executive Director We are pleased to announce that Roger P. Flower has joined the firm as Executive Director. Roger will oversee all business activity for both the Atlanta and Charleston, SC offices. More on page 9. Carlock, Copeland & Stair Attorneys Selected for South Carolina Super Lawyers and Rising Stars We are proud to announce that five of our lawyers have been selected for inclusion on the South Carolina Super Lawyers and Rising Stars lists for More on page 5. We will host our South Carolina Risk Management Seminar for Architects and Engineers on Friday, June 22 and our General Liability and Workers Compensation Seminar at Turner Field on Tuesday, June 26. For more information on these events or to register, please contact Christina Walsh at cwalsh@carlockcopeland.com Phone Fax