2014 Annual Convention. Basic Insurance and Negligence Law Topics

2014 Annual Convention Basic Insurance and Negligence Law Topics Insurance Law Committee/Negligence Law Committee 1.5 General CLE Hours April 30 May 2, 2014 Columbus

Contributors Jennifer N. Brown Arthur, O Neil, Mertz, Michel & Brown Co. LPA Defiance, Ohio Ms. Brown received her BA from Bowling Green State University and her JD from the University of Toledo College of Law. Her professional memberships include the Ohio State Bar Association (Insurance Law Committee; Negligence Law Committee; Unauthorized Practice of Law Committee), Ohio Association for Justice, American Association for Justice, Million Dollar Advocates Forum, and Ohio State Bar Foundation (Fellow). Ms. Brown is a partner with her firm and practices in the areas of insurance law, personal injury law, Social Security disability, domestic relations, and general civil litigation. She is the recipient of the 2013 Community Service Award from the Ohio State Bar Foundation and a Distinguished Service Award from the Ohio Association for Justice. Ms. Brown is also a graduate of the OSBA Leadership Academy. For additional information, please visit www.lawbuilding.com. Steven P. Collier Connelly Jackson & Collier LLP Toledo, Ohio Mr. Collier received his BA from Wittenberg University and his JD from the University of Cincinnati College of Law. He is president of the Ohio Chapter of the American Board of Trial Advocates. Mr. Collier is a nationally known trial lawyer, certified as a Civil Trial Advocate by the National Board of Trial Advocacy, and an associate in the American Board of Trial Advocates. He focuses his practice in the areas of personal injury, wrongful death, and medical malpractice. Mr. Collier has also briefed and argued cases before the Supreme Court of Ohio. In 2005, he authored the Minority Report for the Ohio Medical Malpractice Commission, a nine-member panel appointed to study the effects of the Medical Malpractice Bill (S.B. 281). Mr. Collier has lectured extensively throughout Ohio for the Ohio Association for Justice, local bar associations, Ohio Legal Center Institute, and the National Business Institute in the areas of personal injury and medical malpractice. Also, he was appointed by the Chief Justice of the Supreme Court of Ohio to serve on a task force to formulate guidelines for court reporter certification. Since 1992, Mr. Collier has been a member of the adjunct faculty at the University of Toledo Medical Center, where he teaches Law and Medicine. He has also taught trial practice at the University of Toledo College of Law for six years. Mr. Collier is the author of the book Ohio Personal Injury A Comprehensive Guide, which is available online at www.ohiopersonalinjuryguide.com. For additional information, please visit www.cjc-law.com. Steven R. Smith Connelly Jackson & Collier LLP Toledo, Ohio Mr. Smith received his BA from Miami University, his MA from The Ohio State University, and his JD from The University of Toledo College of Law. His professional memberships include the Toledo Bar Association (Chair of the Bench Bar, Kiroff Committee), Ohio State Bar Association, Ohio State Bar Foundation (Fellow), Toledo Bar Foundation (Fellow), Ohio Association for Justice, Toledo Women s Bar Association, and the Million Dollar Advocates Forum. Mr. Smith is a partner of his firm and devotes his time to business litigation, concentrating on the representation of policyholders in insurance coverage matters. He has asserted claims for coverage under commercial general liability, property, directors and officers, legal malpractice, and business interruption policies and obtained coverage for numerous clients, even when insurance companies first denied coverage. Mr. Smith has litigated insurance coverage issues, negotiated settlements with insurance companies for claims, and conducted coverage reviews for clients facing liability claims from third parties in both state and federal courts. He has briefed and argued cases in the Supreme Court of Ohio. Mr. Smith has also tried and prosecuted appeals of lawsuits involving construction, securities, lender liability, and shareholder disputes and has defended directors and officers against regulatory agencies. He is a frequent lecturer for the Ohio State Bar Association, the Ohio Legal Center Institute, the Ohio Academy of Trial Lawyers, and the Ohio Prosecuting Attorneys Association. For additional information, please visit www.cjc-law.com.

Chapter 1: Avoiding P.I. Litigation Pitfalls: Things That Can Trip You Up! Steven P. Collier Connelly Jackson & Collier LLP Toledo, Ohio Table of Contents Introduction... 1 Service of Process... 1 John Doe Defendants... 2 Ohio Civ.R. 41(A) and Ohio Savings Statute (R.C. 2305.19)... 3 For What It s Wuerth... 3 Changing Deposition Testimony... 5 Ohio Rule of Professional Conduct 1.15d: Disposition of Funds... 5 Statute of Repose... 6 Subrogation and Right of Recovery... 7 Confidentiality Provisions in Settlement Agreements... 7 Other Issues to Ponder... 7 PowerPoint Presentation... 9 Avoiding P.I. Litigation Pitfalls i

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Chapter 1: Avoiding P.I. Litigation Pitfalls: Things That Can Trip You Up! Steven P. Collier Connelly Jackson & Collier LLP Toledo, Ohio Introduction In 1970, the Ohio Supreme Court embraced the concept that In a tort action, the measure of damages is that which will compensate and make the plaintiff whole. Pryor v. Webber, 23 Ohio St.2d 104 (1970). Making the plaintiff whole in a personal injury case was a concept that continued to flourish throughout the 1970 s and well into the next two decades. However, after the Ohio Supreme Court significantly extended uninsured-motorist coverage in corporate policies in Scott-Pontzer v. Liberty Mut. Fire Ins. Co., 85 Ohio St.3d 660 (1999), there was a concerted effort to try to limit the make-whole ideal. Tort reform enactments through Senate Bill 97, Senate Bill 80, Senate Bill 281 and Senate Bill 120, to name a few; have severely restricted the right of a person to be made whole when they are injured through the fault of another. Therefore, the plaintiff practitioner in personal injury in Ohio now must be more careful than ever to avoid the perils and pitfalls of personal injury practice while attempting to achieve the best result for the client. Service of Process Notice pleading, sounds easy enough, doesn t it? Just follow Ohio Civ.R. 8(A) and make sure the complaint contains... (1) a short and plain statement of the claims showing that the party is entitled to relief, and (2) a demand for judgment for the relief to which the party claims to be entitled. Once the case is filed, the attorney may proceed with serving interrogatories, requests for admissions, requests for production of documents and scheduling depositions all the preparation needed for that first big trial. But, what about service of process, as governed by Ohio Civ. Rules 4, 4.1, 4.2, 4.3, 4.5, and 4.6? In Gliozzo v. University Urologists of Cleveland, Inc., 114 Ohio St.3d 141 (2007) in its syllabus, the Court stated that when the affirmative defense of insufficiency of service of process is properly raised and properly preserved, a party s active participation in the litigation of a case does not constitute waiver of that defense. (First Bank of Marietta v. Cline, 12 Ohio St.3d 317 (1984), applied.) In Gliozzo, the plaintiff filed a medical-malpractice action but failed to perfect service pursuant to Civ.R. 3(A) within one year from the date the complaint was filed. The defendant, through counsel, participated in the defense of the case and filed a motion to Avoiding P.I. Litigation Pitfalls 1.1

dismiss more than a year after the case was filed because service of process was not perfected. While the trial court denied the initial motion to dismiss, on the day of trial an oral motion was made to renew the motion to dismiss and it was granted. In citing to the Cline case, the Court determined that a properly asserted and preserved defense may be raised even after the trial has begun. As a result it is important for plaintiff s counsel to promptly address the service of process issue when it is routinely raised by the defendant in an answer containing numerous defenses, many of which do not apply. This can be accomplished pursuant to a 12(D) hearing if defense counsel will not voluntarily amend the answer to remove the service of process defense. Another area of concern that relates to service of process is the dismissal of a complaint pursuant to Ohio Civ. R. 41(A). Laneve v. Atlas Recycling Inc., 119 Ohio St.3d 324 (2008) When a complaint is voluntarily dismissed by a plaintiff in order to be afforded the benefits of the savings statute (R.C. 2305.19(A)), the original action must have been properly commenced or attempted to be commenced. If Civ.R. 3(A) is complied with regarding the commencement or attempted commencement of the action, the savings statute will allow the case to be refiled within one year and extends by one year the time period in which to serve the defendant after the case is refiled. In Laneve, the Court determined that the cause of action was not attempted to be commenced because service was attempted by certified mail instead of personal service when attempting to serve a John Doe defendant. The Court determined that an attempt to commence an action must be pursuant to a method of service that is proper under the civil rules. Ohio Civ. R. 15(B) specifically requires personal service when attempting to serve a John Doe defendant. John Doe Defendants Not sure who did what? Fill in a few John Does in the complaint and maybe a Jane Doe to be extra careful and sit back and wait. Before you do so, you may want to read Erwin v. Bryan, 125 Ohio St.3d 519 (2010). In Erwin, the Supreme Court of Ohio reversed the Court of Appeals and determined that Civ.R. 15(D) could not have been used to prosecute an action against a doctor in a professional corporation because the name of the doctor was known to the administrator of the estate. The Court also determined that even if the administrator did not know the name, the requirements of Civ.R. 15(D) were not met because there was insufficient information to permit a copy of the summons containing the words name unknown to be served on the doctor or the professional corporation. Therefore, the amended complaint did not relate back to the time of the filing of the original complaint. This ruling seemingly limits the use of John Doe defendants to situations where the plaintiff knows who the defendant is and where they reside or do business, but does not know the actual name of the defendant and therefore, can serve the defendant by the name John Doe with a copy of the summons containing the words name unknown. Mardis v. Meadowwood Nursing Home, 12th Dist. No. CA 2010-04-007, 2010-Ohio-4800 This is a medical-negligence case arising out of a claim that a nursing home patient s Coumadin level had not been properly monitored, and as a result, he fell out of bed, hit his head, suffered a subdural hematoma, and later died. The nursing home was sued, along with several John Doe defendants. When an amended complaint was filed which included a specific nurse who participated in the patient s care, a motion to dismiss was filed on behalf of the nurse, and the trial court granted it, determining that the statute of limitations had already passed. The court rejected the argument that the statute of limitations was tolled until the identity of the specific nurse was discovered. The court determined that once the negligent act upon which the complaint was premised was discovered, the plaintiff must act diligently to identify the person or persons responsible in order to sue them individually. The court determined that Civ.R. 15(D) cannot be used as a ceaseless placeholder to get around statute of limitations requirements. 1.2 Basic Insurance and Negligence Law

Ohio Civ.R. 41(A) and Ohio Savings Statute (R.C. 2305.19) Case not going as expected need more time no problem. Just file a 41(A) voluntary dismissal and refile again within one (1) year, right? While Ohio Civ. R. 41(A) has been a savior to many Ohio plaintiff attorneys who are faced with unexpected litigation problems, one should be cautious about its use. There are certain circumstances where a case can be dismissed without prejudice more than once under this rule, i.e., by stipulation of the parties or by court order. Even though the action may be dismissed otherwise than on the merits more than once, the Ohio Savings Statute (R.C. 2305.19) can only be used once, thereby substantially limiting the significance of a double or triple dismissal. Hancock v. Kroger Co., 103 Ohio App.3d 266 (1995); Romine v. Ohio State Highway Patrol, 136 Ohio App.3d 650, 654 (2000); Columbus Bar Ass n v. Finneran, 80 Ohio St.3d 428, 430 (1997). Therefore, it is important to not to blur the distinction between a voluntary dismissal and the savings statute. While the voluntary dismissal rule seems to contemplate the ability to re-file more than once, a strict reading of the savings statue does not allow it. It would seem that the ability to re-file a case that has been dismissed more than once otherwise than on the merits is limited to a situation where the plaintiff is still within the original statute of limitations. For What It s Wuerth Have Comer v. Risko, 106 Ohio St.3d 185 (2005) and Nat. Union Fire Ins. Co. of Pittsburgh, PA v. Wuerth, 122 Ohio St.3d 594 (2009) turned vicarious liability in Ohio upside down? Although the Comer case has been around for just over nine years, it must now be read in connection with National Union Fire Insurance Company of Pittsburgh, PA v. Wuerth, et al. Comer is a medicalmalpractice case and Wuerth is a legal-malpractice case. In Comer, the court determined that the Clark v. Southview agency by estoppel theory would not allow liability to be imposed upon the hospital where the independent contractor physician was not named as a defendant and the statute of limitations against him had expired. The court seemed to limit its opinion to cases involving Clark v. Southview agency by estoppel. However, in Wuerth the court had an opportunity to revisit Comer in the context of a legalmalpractice case. In Wuerth, the court held: [W]hether a law firm may be directly liable for legal malpractice i.e., whether a law firm, as an entity, can commit legal malpractice and two, whether a law firm may be held vicariously liable for malpractice when none of its principals or employees are liable for malpractice or have been named as defendants. Id. at 12. The Court answered both questions in the negative and drew an analogy to medicalmalpractice claims, stating that a hospital cannot commit medical malpractice because only individuals practice medicine. Further, Comer was cited with approval for the principle that a law firm may not be vicariously liable for legal malpractice when no individual attorneys are liable or have been named. After Comer and Wuerth, the question arises as to whether an employee (not just an agent) of a hospital must be named in a medical-malpractice case in order to maintain an action against the hospital. Additionally, is Comer limited to medical-malpractice cases involving agency by estoppel? Finally, can Comer and Wuerth be applied to address respondent superior outside of medical and legal malpractice claims? Avoiding P.I. Litigation Pitfalls 1.3

(1)Taylor v. Belmont Community Hosp., 7th Dist. No. 09 BE 30, 2010-Ohio-3986 The Seventh District Court of Appeals reversed a trial court grant of summary judgment to Belmont Community Hospital which was based upon the trial court s extension of the Ohio Supreme Court s Wuerth decision to a hospital in a medical-negligence case. In Taylor, the plaintiff sued the hospital but did not name individual employees. The court in Taylor distinguished Wuerth as being inapplicable because Wuerth dealt with the relationship between a law firm and its partners and not an employer-employee relationship that existed in the case before it. The court also noted that Justice Moyer twice stressed in his concurrence in Wuerth that it was a narrow holding. Therefore, the court in Taylor refused to extend the Wuerth case... regarding law firm liability for the acts of partners and associates to the arena of hospital liability for the acts of its employees. Id. at 18. (2)Stanley v. Community Hosp., 2d Dist. No. 2010 CA 53, 2011-Ohio-1290 In Stanley, the Second District Court of Appeals reversed a trial court decision granting summary judgment to Community Hospital in a medical negligence case where there were allegations of negligence against the hospital and its employee nurses. Jane and John Doe nurses and physicians were named as defendants in the lawsuit but the complaint was never amended to specifically name any specific nurse, physician, or other hospital employee as an individual defendant. The court in Stanley cited Taylor v. Belmont Community Hosp. with approval and determined that Wuerth was inapplicable to the case, and thus there was no dispute that the plaintiff s suit was timely filed against the hospital for the alleged negligence of its employee nurses under respondeat superior law. (3)Sawicki v. Lucas County Court of Common Pleas, 126 Ohio St.3d 198 (2010) This is a medical-negligence case where the doctor was determined to be a dual status employee of a state hospital and a private corporation. The Supreme Court of Ohio determined that a patient could sue a private corporation alleging that its physician employee was negligent under a theory of respondeat superior. No action was brought in the Ohio Court of Claims against the state hospital. The court rejected the argument that the private employer cannot be liable under the doctrine of respondeat superior because the employee doctor is immune from personal liability. The court declined to extend Comer v. Risko to this case, and stated that it was decided narrowly and turned on the theory of agency by estoppel. In her dissent, Justice Lundberg Stratton objected to the majority s position that because the lawsuit was against the doctor s private employer and not the state or the doctor, that it was unnecessary to determine whether the doctor s conduct was outside the scope of his employment with the state, citing Theobald. Justice Lundberg Stratton also relied upon Wuerth and Comer to argue for dismissal of the case because the employee doctor was not named. The dissent goes on to reason that... whether the claim against the agent is extinguished by the expiration of the statute of limitations or by the agent s immunity, the result is that the agent may not be liable. When no liability may be imposed on the agent, there is no liability to flow through to the principal. Id. at 48. Other cases addressed by Comer and Wuerth include: A. Henry v. Mandell-Brown, lst Dist. No. C-090752, 2010-Ohio-3832, appeal not accepted, 2010- Ohio-376. B. Tisdale v. The Toledo Hosp., 6th Dist. No. L-11-1005, 2012-Ohio-1110. C. Dinges v. St. Luke s Hosp., 6th Dist. No. L-11-1051, 2012-Ohio-2422. D. Waikem v. The Cleveland Clinic Found., 5th Dist. No. 2011 CA 00234, 2012-Ohio 5620, appeal not accepted, 2013-Ohio-0065. 1.4 Basic Insurance and Negligence Law

Changing Deposition Testimony Picture sitting in a deposition of an expert witness to whom you have already paid a substantial amount of money for their time to review records and give testimony and the expert fails to adequately answer a question to satisfy the legal requirements of admissibility. Is it appropriate to sit and hope for the witness to miraculously realize the error, ask a follow-up question, or perhaps wait and later attempt to add to the deposition testimony with a subsequent affidavit from the expert? This issue is addressed in Pettiford v. Aggarwal, 126 Ohio St.3d 413 (2010) a medical-malpractice negligence case where the plaintiff s expert was deposed and provided an opinion regarding departure from the standard of care, but stated he did not intend to offer any opinions about causation. When the defendant doctor moved for summary judgment, the plaintiff obtained an affidavit from the plaintiff s expert providing an opinion on causation favorable to the plaintiff. The Supreme Court of Ohio reviewed its ruling in Byrd v. Smith, 110 Ohio St.3d 24 (2006), which held that a party could not use an affidavit that is inconsistent with or contradictory to the party s deposition testimony in opposing a motion for summary judgment. The court extended this rule to apply in the instant case to a non-party expert witness, unless the expert sufficiently explains the reason for the contradiction. The issue was remanded to the lower court. In his dissent, Justice Brown argued that the initial determination by the lower court needs to be whether the affidavit contradicted or only supplemented the deposition testimony. In that regard, it is interesting that the Court of Appeals opinion described the plaintiff s expert s deposition testimony as not intending to offer opinions about causation, but the Ohio Supreme Court s characterization was that the expert testified he could not give any opinions about causation. It seems like there is a distinction between would and could in determining whether a contradiction exists so perhaps the precise framing of the deposition question may be determinative of whether a supplemental affidavit is allowed. Ohio Rule of Professional Conduct 1.15d: Disposition of Funds What do you do if a client in a personal injury case wants to ignore subrogation? The consummate legal answer is easy: it depends. There are many reasons to address subrogation up front, ranging from Medicare s statutory rights (it can go against the attorney if its interest is ignored) to being able to substantially reduce the subrogation interest with attorney involvement. However, perhaps the most important reason for the attorney to properly address subrogation is it may give rise to an ethical violation in certain instances. For example, under Professional Rule of Conduct Rule 1.15(d) and (e), a lawyer may commit an ethical violation if disbursements of a settlement are made from the lawyer s escrow account without regard to a subrogated carrier who has put the lawyer on notice that it has a lawful interest in the settlement funds. Rule 1.15(d) and (e) are set forth below: (d)upon receiving funds or other property in which a client or third person has a lawful interest, a lawyer shall promptly notify the client or third person. For purposes of this rule, the third person s interest shall be one of which the lawyer has actual knowledge and shall be limited to a statutory lien, a final judgment addressing disposition of the funds or property, or a written agreement by the client or the lawyer on behalf of the client guaranteeing payment from the specific funds or property. Except as stated in this rule or otherwise permitted by law or by agreement with the client or a third person, confirmed in writing, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive. Upon request by the client or third person, the lawyer shall promptly render a full accounting regarding such funds or other property. Avoiding P.I. Litigation Pitfalls 1.5

(e)when in the course of representation a lawyer is in possession of funds or other property in which two or more persons, one of whom may be the lawyer, claim interests, the lawyer shall hold the funds or other property pursuant to division (a) of this rule until the dispute is resolved. The lawyer shall promptly distribute all portions of the funds or other property as to which the interests are not in dispute. The key parts of the above rules are determining what is a lawful interest, which includes a statutory lien, a final judgment, or a written agreement guaranteeing payment. Another key element is that the lawyer must have actual knowledge of the lawful interest. However, if there is actual knowledge of the lawful interest by a third party, then the attorney must not disburse the funds until the dispute is resolved. Statutory liens may include Medicare, Medicaid and the Ohio Bureau of Workers Compensation who have statutory rights of subrogation and have formulas that can be the starting point and, unfortunately, sometimes the ending point for negotiations. (42 U.S.C. 1395(y)(b)(2); R.C. 5101.58, 5105.59; R.C. 4123.93, 4123.931.) Contractual rights of subrogation may arise with provisions in health and auto policies. When subrogation claims are resolved, it is best to get a written statement from the subrogated carrier stating that the settlement is a full and final resolution of the subrogated claim. This can be done by obtaining a letter from the subrogated carrier to that extent or having a receipt signed by the subrogated carrier when it receives its settlement check. Having the former attached to the settlement or closing statement with the client is also a good idea as it is evidence of how the matter was resolved. Statute of Repose I have never fully agreed with the need for a statute of limitations, let alone statutes of repose. If the universe is roughly 13.798 billion years old, it seems a tad arbitrary to impose a one-year statute of limitations for medical claims or even two years for auto cases. Even the discovery rule doesn t seem to expand the statute of limitations in proportion to the expanding universe; enough Carl Sagan. And if the statute of limitations are not enough, there are two areas of personal injury law where there is another statutorily-imposed filing deadline separate from the statute of limitations. There is a statute of repose for medical claims and product liability claims, R.C. 2305.113(C)(1) and R.C. 2305.10(C)(1), respectively. In medical claims, the statute of repose is generally four years from the date of the malpractice, with an exception if the discovery is within the third year and there is also a tolling period for minors or persons of unsound mind. For product liability, the claim must generally be brought within ten years from the date that the product was delivered to its first purchaser or first lessee who was not engaged in a business in which the product was used as a component in the production, construction, creation, assembly, or rebuilding of another product. The statute of repose for medical claims was upheld by the Ohio Supreme Court in Ruther v. Kaiser, 134 Ohio St.3d 408, 2012, and for product liability claims in Groch v. Gen. Motors Corp., 117 Ohio St.3d 192, 2008. While the medical claim and product liability claim practice is quite specialized, it is possible that the general civil practice attorney may take in a case, expecting to refer it out eventually. The holding penalty for missing the statute of limitations or statute of repose can be severe. 1.6 Basic Insurance and Negligence Law

Subrogation and Right of Recovery In the 1980 s, subrogation in Ohio could be covered in five minutes. It didn t even exist in workers compensation cases and was often not in auto policies for medical payments coverage. Now it can take a day or so to cover subrogation in its entirety, so the focus will be on just a few points. A. Obtain the subrogation language, if contractual. Carefully review the language to see the extent of the subrogated interest. Most of the time, the language prevents a reduction for attorney fees or states the make-hold doctrine does not apply. Even when those provisions are present, it is often still possible to negotiate a reduction of the subrogated claim. One thing to watch out for is whether the subrogation language attempts to cover future payments. Some policies have a provision that a future payment for medical bills under the policy after the thirdparty claim has been settled will not be made if the bills are related to the incident giving rise to a third-party recovery. B. There may also be right of recovery language, in addition to subrogation language. This language typically requires repayment if the insured recovers against a third party and can be more expansive than creating a subrogation right where the insurer is in the shoes of the insured. C. Most subrogation right of recovery clauses have a provision that the insurer is required to receive notice before there is a settlement with a third party. D. Sometimes a client may just want to have unpaid medical bills paid by a third party, but the problem that arises is that the receipt of funds for this purpose may be subject to the insurer s claim for right of recovery or subrogation. Confidentiality Provisions in Settlement Agreements Dennis Rodman was in the news again this year, with his trip to North Korea. While some viewed his visit as inappropriate, at least it did not affect the settlement of a personal injury claim. The same cannot be said for the impact of Dennis Rodman when he had an altercation with an individual named Amos, who was photographing a Bulls basketball game. As a result of the altercation, Amos pursued legal action, which resulted in a settlement that had a confidentiality provision. In Amos v. Commissioner of Internal Revenue, 2003 W.L. 22839795 (U.S. Tax Ct., 2003), the court found that a portion of the settlement was for the confidentiality agreement and it was not exempt from the general taxing statute. How does a lawyer become a defensive specialist like Rodman to avoid this problem? One way to address this issue is to have the confidentiality provision be mutual where the parties make reciprocal promises regarding confidentiality. This provision should also include language that a portion of the settlement is consideration for the promise of confidentiality. See What Does Dennis Rodman Have to do with Your Settlement Agreements?, by Matthew L. Garretson and Sylvius von Saucken, www.garretsonfirm.com. Other Issues to Ponder A. UM/UIM separate statute of limitations in policy. B. UIM written consent before settling with tortfeasor. C. Closing statement required by Ohio Code of Professional Conduct Rule 1.5(c)(2) and (e). Avoiding P.I. Litigation Pitfalls 1.7

D. Probate Court approval of minor settlements, no exceptions. E. Bankruptcy of client can result in trustee taking over claim. F. Consideration of government preservation trust or qualified settlement fund in structured settlements. G. Medicare set-aside analysis. 1.8 Basic Insurance and Negligence Law

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Chapter 2: Insurance Law Nuts and Bolts Steven R. Smith Connelly Jackson & Collier LLP Toledo, Ohio Table of Contents Types of Policies... 1 A. First-party insurance... 1 B. Third-party coverage.... 1 1. Occurrence insurance policies.... 1 2. Claims-made insurance policies.... 2 Components of a Policy... 2 A. Declarations page.... 2 B. Coverage grant.... 2 1. Insuring agreement.... 2 2. Duty to defend... 3 3. All sums.... 3 C. Policy definitions... 4 D. Who is an insured?... 5 E. Policy exclusions.... 5 F. Policy conditions.... 5 1. Notice/prejudice rule.... 6 2. Notice of circumstances.... 6 G. Policy endorsements.... 7 Binders... 7 Excess Policies... 7 Umbrella Policies... 8 Establishing Coverage... 8 A. Contract.... 8 Insurance Law Nuts and Bolts i

B. Plain language rule.... 8 C. Construing the policy in favor of coverage.... 8 D. Dealing with ambiguities.... 9 E. Effectiveness of exclusions.... 9 F. Duty to defend.... 10 G. Who is insured?... 10 H. Bad faith.... 10 ii Basic Insurance and Negligence Law

Chapter 2: Insurance Law Nuts and Bolts Steven R. Smith Connelly Jackson & Collier LLP Toledo, Ohio Types of Policies A. First-party insurance. There are two general categories of insurance policies: third-party liability policies and firstparty policies. First-party insurance is insurance covering a loss that the insured itself might incur. Such insurance includes theft, fire, health, disability and life insurance policies. These are policies pursuant to which the insurer covenants to reimburse the insured for losses directly incurred by the insured. By example, if an insured sustains property damage to its automobile or home, and seeks insurance coverage for such damage, the insured would be seeking firstparty coverage. Another name for this coverage would be indemnity insurance coverage. B. Third-party coverage. By contrast, liability insurance affords coverage for amounts owed by the insured to third parties. Examples of this type of insurance include lawyers professional, physician s liability, automobile liability, and commercial general liability. In this type of insurance, the insurance company promises to indemnify the insured for sums that the insured becomes legally obligated to pay to others. Some insurance policies contain both first-party and third-party coverages. For instance, an automobile policy provides first-party coverage for damage to the insured s vehicle and liability coverage for amounts that might be owed to a third-party for property damage or bodily injury. A typical homeowner s policy provides first-party coverage for physical damage to the dwelling or loss of personal property, but also contains liability coverage that would protect an insured against claims of negligence from third-parties. 1. Occurrence insurance policies. Occurrence-based insurance policies are a common type of liability policy. Coverage under these policies is triggered by the occurrence of injury during the applicable policy period, regardless of when the claim is first made. What is required is that injury of the kind covered under the policy, and caused by a covered event, resulted during the policy year. These types of policies exposed insurers to coverage obligations and liabilities for many years after the policy was issued. This type of insurance exposure is often referred to as tail or long-tail liability. An example of long-tail exposure would be claims for environmental liability and asbestos bodily injury claims. In order to limit their liability for such claims, insurers developed exclusions to eliminate coverage for pollution and asbestos claims. Insurance Law Nuts and Bolts 2.1

2. Claims-made insurance policies. Another response to the liability exposure insurers incurred under occurrence-based policies was the development of claims-made policies. A claims-made policy is distinct from an occurrence policy. A claims-made policy premises coverage on a claim that is first made against the insured during the policy period. Claims-made policies, unlike occurrence policies, are designed to limit liability of insurers to a fixed period of time, regardless of when the occurrence giving rise to the claim occurred. Components of a Policy A. Declarations page. The declarations page of an insurance policy contains the general information which is included in the insurance contract. The type of information on this page(s) includes: the policy number, name and address of the insured, dates of policy coverage, the insurance company issuing coverage, the limits of liability, amount of premium, and a designation of what type of entity the named insured is (an individual, partnership, organization, etc.). The declarations page should also include a list of all the forms and endorsements that are attached. B. Coverage grant. 1. Insuring agreement. Insurance policies vary in the scope of coverage they provide. The coverage grant is the portion of the policy where the insurer agrees to insure the policy purchaser (and others) against specific risks and where the risks which are insured by the policy are identified. Except where contrary to public policy, or listed as an exclusion, an insurance policy covers any risk which is named in the coverage grant. Any risk not listed as one against which the policy insurers will not be covered by the policy. An example of a coverage grant in a commercial general liability policy follows: We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which insurance applies. We will have the right and duty to defend the insured against any suit seeking those damages. The coverage grant (often called an insuring agreement) will then contain the further requirement that the bodily injury or property damage occur during the policy and be caused by an occurrence. Occurrence is usually defined to mean an accident, including continuous or repeated exposure to substantially the same general harmful conditions. Also, a commercial general liability policy generally insures against personal and advertising injury liability. The typical insuring agreement for this type of coverage will state: We will pay those sums that the insured becomes legally obligated to pay as damages because of personal and advertising injury to which this insurance applies. We will have the right and duty to defend the insured against any suit seeking those damages. Personal and advertising injury is most frequently a defined term that includes injury, including consequential bodily injury arising out of false arrest, malicious prosecution, wrongful eviction, libel and slander and copyright infringement used in an advertisement. 2.2 Basic Insurance and Negligence Law

The above are examples of occurrence-based, third-party liability insuring agreements. A claims-made, third-party policy may have an insuring agreement reading as follows: We will pay on behalf of the insureds all loss which they shall be legally obligated to pay, resulting from any claim first made during the policy period for a wrongful act. We will have the right and duty to defend the insureds against any such claim. Usually, a claims-made policy will have an alert in bold print on the declarations page identifying the policy as a claims-made policy. As can be readily seen, it is the claim that must be first made during the policy, regardless of when the occurrence or accident, or wrongful act occurs. Under the occurrence policies, it is the injury that must occur during the policy, and the policy is triggered by that injury, even though the claim against the insured may not be presented for many years or decades. 2. Duty to defend Another feature of third-party liability policies is the duty to defend the insured. Not all policies contain a duty to defend, but it is customary in most professional liability policies, errors and omissions policies, and commercial general liability policies. A duty to defend is a valuable promise by the insurer contained in such policies. Often, the duty to defend is not limited by the amount of liability coverage. In other words, while the limits of liability for indemnity payment on behalf of the insured may be $100,000 or $1,000,000, the duty to defend, and associated costs therewith, is unlimited. In many instances, the value of the defense coverage could far exceed the amount of liability limits for which the insurance company is exposed. Sometimes, the limits of liability are eroded by the defense costs and expenses. In that instance, the greater the defense costs, the less money the insurance company is obligated to pay for any liability that may be imposed upon its insured. The duty to defend is often said to be broader than the duty to indemnify. What is meant by this is that the duty to defend is triggered by the allegations found in the complaint or claim. Therefore, if the allegations of the complaint state a cause of action or facts which would support a cause of action covered by the coverage of the policy, the insurer must defend. This is true even if the allegations are groundless or false or otherwise unwarranted. Complaints often contain several counts of alternative theories of recovery. Therefore, the duty to defend exists even if only one of the claims could potentially give rise to the duty to indemnify. For example, if a complaint states a cause of action for fraud or intentional conduct that is ordinarily not covered by liability insurance, and contains a claim for negligence that would be covered under the policy, the insurance company has a duty to defend the entire lawsuit. The defense obligation extends to the claims for which no coverage might exist, if successfully proven. Hence, the basis for stating the duty to defend is broader than the duty to indemnify. 3. All sums. The Ohio Supreme Court has held that when multiple commercial general liability policies are triggered by a single continuous injury claim, the insured may obtain coverage under a selected policy, which must pay all sums arising out of that claim, up to the policy limits. Goodyear Tire & Rubber Co. v. Aetna Cas. & Surety Co., 95 Ohio St.3d 512, 769 N.E.2d 835 (2002); Penn. Gen. Ins. Co. v. Park-Ohio Indus., 126 Ohio St.3d 98, 99, 2010-Ohio-2745, 930 N.E.2d 800. The Insurance Law Nuts and Bolts 2.3

policyholder is permitted to choose, from the pool of triggered primary policies, a single primary policy against which it desires to make a claim. The selected policy must then cover all sums incurred as damages... subject to that policy s limits of coverage. The all sums language comes from the coverage grant commonly found in commercial general liability policies whereby the insurance company agrees to pay all sums the insured is legally liable to pay. In rendering such a decision, the Supreme Court of Ohio rejected the prorata approach advocated by insurers, which would have required the policyholder to pursue separately a pro-rata portion of its loss from each insurer that issued a triggered policy. For instance, if ten years of policies were triggered by a long-tail claim, the insurer s approach would have allowed the policyholder to recover only 1/10 of a claim from any particular policy. The Goodyear decision was an important decision for policyholders facing long-tail claims. C. Policy definitions. Insurance policies contain a definition section by which the insurance company defines selected terms. Those terms are often denoted by bold type or are contained within parenthesis, such as the above examples illustrate. The defined terms in an insurance policy are binding upon the parties and are meant to be used in order to construe the policy. Undefined terms in a policy are given their common and ordinary meaning, unless another meaning is ascribed to those terms through trade practice or otherwise. Examples of common definitions found in a commercial general liability policy are as follows: Auto means a land motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment. But auto does not include mobile equipment. Bodily Injury means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time. Employee includes a leased worker. Employee does not include a temporary worker. Property Damage means: a. Physical injury to tangible property, including all resulting loss of use of that property. * * * b. Loss of use of tangible property that is not physically injured. * * * For the purposes of this insurance, electronic data is not tangible property. Suit means a civil proceeding in which damages because of bodily injury, property damage or personal and advertising injury to which this insurance applies are alleged. Your work : Means: 1. Work or operations performed by you or on your behalf; and 2. Materials, parts or equipment furnished in connection with such work or operations. As can be seen by these examples, definitions in a policy are very specific and can often be quite detailed, even cumbersome. 2.4 Basic Insurance and Negligence Law

D. Who is an insured? Although often not included in the definition section, the policy will also define who is an insured. The person or entity designated as the named insured on the declarations page is always an insured under the policy. The policy may then elaborate and include others who are insureds. For instance, if the named insured is a corporation, then the corporation itself will be an insured and the policy might also include the directors and officers, managers and employees of the corporation as an insured. If the insured is an individual, the policy may include the individual s spouse and relatives living in the individual s household as insureds. E. Policy exclusions. The exclusions section of the policy lists specific risks that will not be covered under the policy. An exclusion takes away coverage that would otherwise be provided by the coverage grant. Some exclusions are meant to take away coverage for acts or events that are intentionally caused by the insured. After all, insurance is meant to protect against accidental, unintended, fortuitous events, e.g., wind damage to the roof of a dwelling, negligent operation of a motor vehicle, an error in handling a legal matter. Therefore, a common exclusion in a commercial general liability policy would be expected or intended injury. Such an exclusion would state the insurance does not apply to bodily injury or property damage expected or intended from the standpoint of the insured. Other exclusions are simply intended to limit the insurance company s liability for events for which the policy was not designed to cover and which a premium was not charged. For instance, a commercial general liability policy would exclude injuries arising out of the use of an auto. There are auto insurance policies designed to cover that type of liability. Similarly, there typically would be an exclusion in a commercial general liability policy for claims arising under workers compensation and similar laws because those types of claims are covered by other types of policies or under a state workers compensation system. F. Policy conditions. A policy also contains conditions which must be satisfied before an insurance company is required to provide coverage under the policy. Those conditions found in liability policies include the duty of the insured to cooperate with the insurance company in the defense or investigation of the claim, notice conditions, and consent to settle conditions. In a first party property and casualty policy, a typical condition would be the preparation of a proof of loss by the insured which sets forth the specific property claimed to have been lost or damaged. Also, the ability of the insurance company to take an examination under oath of the insured claiming a loss before paying that loss is a common condition. Policy conditions are those insurance policy provisions that are often overlooked. The conditions are not part of the insuring agreement or exclusions. They are often placed at the end of the policy where it might be easy to forget they are there. Policy conditions can impact the coverage available, however, since the insured s failure to comply with policy conditions can result in a loss of coverage. Conversely, insurers may waive the right to assert a policy condition that is not satisfied. Insurance Law Nuts and Bolts 2.5

1. Notice/prejudice rule. All policies contain notice requirements. Commercial general liability policies require the insured to provide the insurance company with notice of an occurrence or an offense which may result in a claim as soon as practicable. The insured must notify the insurance company if a claim is made or suit is brought against the insured immediately. In this context, Ohio courts have construed as soon as practicable and immediately to mean within a reasonable time given the particular circumstances. Much litigation has resulted because of notice provisions and the allegation by an insurance company that notice was provided late. In Ferrando v. Auto-Owners Mutual Ins. Co., 98 Ohio St.3d 186 (2002), the Court held that when an insurer s denial of coverage is premised upon the insured s breach of a prompt notice provision in a policy of insurance, the insurer is relieved of the obligation to provide coverage if it is prejudiced by the insured s unreasonable delay in giving notice. An insured s unreasonable delay in giving notice is presumed prejudicial to the insurer absent evidence to the contrary. Therefore, Ferrando articulated a two-step determination for notice. The first step requires that the court must determine whether the insured s notice was timely. This determination is based on asking whether the insurer received notice within a reasonable time in light of all the surrounding facts and circumstances. If the insurer did receive notice within a reasonable time, the notice inquiry is at an end and the notice provision was not been breached. If the insured did not receive reasonable notice, prejudice is presumed and the next step is to inquire whether the insurer was actually prejudiced. Unreasonable notice gives rise to a presumption of prejudice to the insurer. The insured bears the burden of presenting evidence to rebut this presumption. The insurer then may present evidence of actual prejudice to respond to the insured s rebuttal evidence. The two step approach for determining notice and prejudice as set forth in Ferrando does not apply to claims-made policies. Hence, a claims-made policy triggered by the reporting of a claim outside the policy period would have the effect of precluding coverage under that policy. Notice requirements in a claims-made policy allow the insurer to close its books on a policy and thus attain a level of predictability unattainable under standard insurance policies. Elkins v. Am. Int l Special Lines Ins. Co., 611 F. Supp. 3d 752, 762 (S.D. Ohio 2009). 2. Notice of circumstances. Claims-made policies do have a provision for notification of circumstances that the insured believes may reasonably be expected to form the basis of a claim or suit. For example, most claims-made policies require the insured to notify the insurance company of circumstances that may give rise to a claim in the future. If the insured notifies the carrier of such circumstances, and a claim or suit is later filed after the policy period, the claims-made policy will provide coverage and treat the claim as filed at the time the notice of circumstances was given to the insurance company. The insured must be aware that if a notice of circumstances is not given to the insurance company and a claim is later filed, the insurance company may take the position that the claim relates back to whatever circumstances the insured was aware of and that the notice of the claim is late for that particular policy period, and is not covered by the claimsmade policy. Because the insured was aware of circumstances that gave rise to a claim but did not provide notice then, the insurance company has a basis to deny coverage under the policy in effect when the claim is made. The standard to be used in such a case is an objective standard based upon what a reasonable insured would understand based upon the circumstances. 2.6 Basic Insurance and Negligence Law

G. Policy endorsements. Endorsements are changes to the policy terms. Endorsements commonly change a section in the standard policy form by adding language to it or possibly deleted what was in the standard policy form and substituting new text. Endorsements will be identified on the declarations page and will be attached to the policy. Endorsements will also describe which policy part will be modified and in cases where multiple coverage parts are involved in an insurance program, it is important to determine which coverage part is changed by the particular endorsement. Therefore, an investigation into insurance coverage is not complete until all the endorsements are reviewed and the pertinent endorsements added to the policy. Also, an endorsement may contain an additional exclusion not found in the coverage part or may add coverage by expanding the coverage grant. Endorsements may be issued during the policy period and after delivery of the original declarations page and policy language. In such case, the endorsements will normally have an effective date and must be read into the policy as of that date. As such, the declarations page would not contain a reference to that endorsement, so unless a modified declarations page was issued, anyone investigating coverage must make sure all endorsements are obtained. Binders An insurance binder is a contract of temporary insurance to be effective as insurance coverage until a formal policy is drafted and issued. N. Am. Specialty Ins. Co. v. Myers, 111 F.3d 1273, 1278 (6 th Cir. 1997). A binder is not a complete contract, but is evidence of an obligation that will be effective upon the satisfaction of certain conditions. Binders are used in the insurance industry to secure coverage while the formal application process is being completed. The binder provides no greater coverage than the policy that is envisioned to be issued after satisfaction of the conditions. Therefore, ordinary provisions, exclusions and definitions are read into a temporary binder unless there was an express agreement that would be inconsistent with such provisions. [A]n agent may contract on behalf of an insurance company to issue temporary coverage of an applicant pending processing of his application. Such agreements are referred to as preliminary or temporary contracts or binders. Although they are often evidenced by written receipts, they may be oral, in which case their existence must be proven by clear and convincing evidence. Clements v. Ohio State Life Ins. Co. (1986), 33 Ohio App.3d 80, 85 (citations omitted). Sometimes, the effectiveness of a binder or an agreement for temporary insurance is expressly conditioned upon the fulfillment of certain requirements, such as the completion of a medical examination, or insurability under company rules, or approval of the application, and the duration of the temporary coverage may also be specified. Clements v. Ohio State Life Ins. Co. (1986), 33 Ohio App.3d 80, 85. [I]f the applicant is merely told he is covered, and no time is specified for termination of temporary coverage, coverage commences immediately and continues for a reasonable amount of time for issuance of the policy. Clements v. Ohio State Life Ins. Co. (1986), 33 Ohio App.3d 80, 85-86. Excess Policies Excess insurance provides additional amounts of coverage for the same risks which are covered by the underlying primary insurance policy. Alternatively, an excess policy may provide coverage for only certain limited losses or damages which are covered by the primary policy. Whether it provides the same or a smaller range of coverage, however, excess insurance is a Insurance Law Nuts and Bolts 2.7

secondary policy which kicks in only when a certain amount of the coverage allowed under the primary insurance policy has been used. Generally, an excess insurer is liable only for the amount of loss or damage in excess of the coverage provided by all other applicable insurance policies. The insurer will not cover any loss or damage which is covered by other insurance, whether or not the other insurance is collectible. Value City, Inc. v. Integrity Ins. Co. (1986), 30 Ohio App.3d 274, see also Wurth v. Ideal Mut. Ins. Co. (1987), 34 Ohio App.3d 325. Umbrella Policies An umbrella policy is a specific type of excess insurance which can actually provide broader coverage than the primary insurance policy. See Gillette v. Paul Guardian Ins. Co. (1996), 113 Ohio App.3d 564, 566. In this sense, an umbrella policy can serve to provide both primary insurance coverage and secondary coverage. These policies fill gaps in coverage both vertically (by providing excess coverage) and horizontally (by providing primary coverage). Commercial Union Insurance Co. v. Walbrook Insurance Co. (1993), 7 F.3d 1047. So, under an umbrella policy, unlike a regular excess policy, there may be cases when an insurer will be required to cover claims which are not covered under the primary insurance policy. Establishing Coverage The following are, in no particular order, a collection of key holdings, phrases, and comments made by Ohio courts in dealing with insurance disputes. For the most part, these statements embody some of the most important aspects of Ohio insurance law when it comes to arguing a coverage dispute. A. Contract. An insurance policy is a contract, and the relationship between the insurer and the insured is purely contractual in nature. Nationwide Mut. Ins. Co. v. Marsh, 15 Ohio St.3d 107, 109, 472 N.E.2d 1061 (1984). The interpretation and construction of insurance policies is a matter of law to be determined by the court using rules of construction and interpretation applicable to contracts generally. Gomolka v. State Auto Ins. Co., 70 Ohio St.2d 166, 167-168, 436 N.E.2d 1347 (1982). B. Plain language rule. [W]ords and phrases used in an insurance policy must be given their natural and commonly accepted meaning, where they in fact possess such meaning, to the end that a reasonable interpretation of the insurance contract consistent with the apparent object and plain intent of the parties may be determined. Gomolka v. State Auto Mut. Ins. Co. (1982), 70 Ohio St.2d 166, 167-68, citing Dealers Dairy Products Co. v. Royal Ins. Co. (1960), 170 Ohio St. 336. [W]here the provisions of an insurance policy are clear and unambiguous courts may not indulge themselves in enlarging the contract by implication in order to embrace an object distinct from that contemplated by the parties, * * * nor read into the contract a meaning not placed there by an act of the parties, * * * nor make a new contract for the parties where their unequivocal acts demonstrate an intention to the contrary * * *. Gomolka v. State Auto. Mut. Ins. Co. (1982), 70 Ohio St.2d 166, 168 (citations omitted). C. Construing the policy in favor of coverage. The insured bears the burden to show that its loss was covered under the policy. Chicago Title Ins. Co. v. Huntington Nat l Bank, 87 Ohio St.3d 270, 273, 719 N.E.2d 955 (1999). 2.8 Basic Insurance and Negligence Law

A liability coverage provision is interpreted broadly, and the general presumption in favor of coverage must be overcome in order for coverage to be denied. Stickovich v. Cleveland (2001), 143 Ohio App.3d 13, 37, 757 N.E.2d 50. In order to defeat coverage, the insurer must establish not merely that the policy is capable of the construction it favors, but rather than such an interpretation is the only one that can fairly be placed on the language in question. Andersen v. Highland House Co. (2001), 93 Ohio St.3d 547. D. Dealing with ambiguities. Ohio has traditionally given a liberal interpretation to insurance coverage. Ambiguities within a policy are always resolved in the favor of the insured. Nationwide Ins. Co. v. Auto-Owners Mut. Ins. Co. (1987), 37 Ohio App.3d 199, 202, citing Bobier v. Natl. Cas. Co. (1944), 143 Ohio St. 215, paragraphs two and three of the syllabus. The insurer, having prepared the policy, must also be prepared to accept any reasonable interpretation, consistent with the [apparent object and plain intent of the parties], in favor of the insured. Gomolka v. State Auto Mut. Ins. Co. (1982), 70 Ohio St.2d 166, 168, citing Home Indem. Co. v. Plymouth (1945), 146 Ohio St. 96, 101. Where it may reasonably be concluded that the language of a policy is ambiguous and may therefore be subject to different interpretations, the ambiguity will be construed in favor of the insured. This is a universally applied axiom of construction. Gomolka v. State Auto Mut. Ins. Co. (1982), 70 Ohio St.2d 166, 168. In construing the language of a contract, he who speaks must speak plainly, or the other party may explain to his own advantage. McKay Machine Co. v. Rodman (1967), 11 Ohio St.2d 77, 80. E. Effectiveness of exclusions. An exclusion is interpreted narrowly in order not to defeat coverage that would apply absent the exclusion. The general presumption in favor of coverage operates to make an exclusion barring coverage applicable only if it is clearly expressed. Sharonville v. Am. Emps. Ins. Co., 109 Ohio St.3d 186, 2006-oho-2180, 846 N.E.2d 833. Where there is an ambiguity in an exclusion clause in an insurance policy, that meaning which excludes the least is necessarily the most liberal construction for the insured. Harris, Jolliff & Michel Inc. v. Motorists Mut. Ins. Co. (1970), 21 Ohio App.2d 81, paragraph four of the syllabus. [E]xclusions in an insurance contract are not preferred. Suburban Community Hosp. v. Lindquist (1982), 69 Ohio St.2d 302, 304. The burden of proving the applicability of an exclusion is on the insurer. See, e.g., Continental Ins. Co. v. Louis Marx Co., Inc. (1980), 64 Ohio St.2d 399 at the syllabus. [E]xceptions or exclusions in insurance policies are strictly construed in favor of the insured and against the insurer. Nationwide Ins. Co. v. Auto-Owners Mut. Ins. Co. (1987), 37 Ohio App.3d 199, 202. Where exceptions, qualifications or exemptions are introduced into an insurance policy, a general presumption arises to the effect that that which is not clearly excluded from the operation of such contract is included in the operation thereof. Harris, Jolliff & Michel Inc. v. Motorists Mut. Ins. Co. (1970), 21 Ohio App.2d 81, paragraph two of the syllabus. Insurance Law Nuts and Bolts 2.9

The insurer, being the one who selects the language in the contract, must be specific in its use; an exclusion from liability must be clear and exact in order to be given effect. Lane v. Grange Mut. Companies (1989), 45 Ohio St.3d 63, 65. F. Duty to defend. An insurer s duty to defend is broader than the duty to indemnify. Sharonville v. Amer. Emp. Ins. Co., 109 Ohio St.3d 186, 2006-Ohio-2180, 846 N.E.2d 833. When the allegations in the complaint or any allegations arising after the complaint state a claim that is potentially within the policy coverage, the insurer must accept the defense of the claim, regardless of whether they are related to the insurance-policy coverage. Sharonville. To determine when the duty to defend arises, one must look to the allegations in the complaint and the insurance policy to ascertain whether the insured s actions were within the coverage of the policy. Snowden v. Hastings Mut. Ins. Co., 177 Ohio App.3d 209, 2008-Ohio- 1540, 894 N.E.2d 336. The scope of the allegations in the complaint against the insured determines whether an insurance company has a duty to defend the insured. The insurer must defend the insured in an action when the allegations state a claim that potentially or arguably falls within the liability insurance coverage. However, an insured need not defend any action or claims within the complaint when all the claims are clearly and indisputably outside the contracted coverage. Ohio Govt. Risk Mgt. Plan v. Harrison, 115 Ohio St.3d 241, 2007-Ohio-4948, 874 N.E.2d 115. G. Who is insured? An insured can be the policyholder or another who is entitled to insurance coverage under the terms of the policy. When a court decides whether a claimant is insured under a policy, ambiguities are construed in favor of the policyholder, not the claimant. Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216, 2003-Ohio-5849. H. Bad faith. In Zoppo v. Homestead Insurance Company (1994), 71 Ohio St.3d 552, the Ohio Supreme Court clarified the standard to be applied in determining whether or not an insurance company has acted in bad faith. An insurer fails to exercise good faith in the processing of a claim of its insured where its refusal to pay the claim is not predicated upon circumstances that furnish reasonable justification therefore. 2.10 Basic Insurance and Negligence Law

Chapter 3: Medicare Secondary Payer Compliance Jennifer N. Brown Arthur, O Neil, Mertz, Michel & Brown, Co. LPA Defiance, Ohio Table of Contents Introduction: Medicare Secondary Payer Compliance... 1 The Problems with Medicare and Lien Issues... 1 A. Contacting Medicare: Surely there s a short cut, right?... 1 B. The Medicare Administrative Process: Paper or Porthole... 2 1. Paper... 2 2. Medicare porthole.... 3 C. Formula: How Medicare calculates the lien.... 3 The Law... 3 A. The Law... 3 B. Past liens resolution see above.... 5 C. Future liens: Medicare set asides.... 5 Can Medicare Be Added to a Lawsuit to Speed up Lien Resolution?... 6 Why Should You Care?... 6 Medicare Secondary Payer Recovery Contractor (MSPRC) Contact... 7 Proof of Representation... 9 Medicare/Coordination of Benefits Letter... 11 Final Settlement Detail... 13 Electronic Code of Federal Regulations... 15 Workers Compensation Medicare Set Aside Arrangements... 17 Medicare Secondary Payer Compliance i

Medicare Secondary Payer Cases Letter... 19 ii Basic Insurance and Negligence Law

Chapter 3: Medicare Secondary Payer Compliance Jennifer N. Brown Arthur, O Neil, Mertz, Michel & Brown, Co. LPA Defiance, Ohio Introduction: Medicare Secondary Payer Compliance The purpose of this seminar is to outline items for consideration as to the issue of Medicare Secondary Payer Compliance. The best advice is start processing the Medicare lien issues as soon as you get the case. Have your clients sign the Medicare release at intake; notify Medicare of your representation right away; monitor the conditional payment; object to items not related to your client s injury; plan your settlements to be delayed why you wait for a response from Medicare, especially if coverage is limited; and be prepared to follow up...and follow up...and follow up, until you get the answers you need from Medicare. The main lesson is you cannot avoid Medicare, so start early working on the Medicare lien. The second lesson is if you do not have the time and patience, then you will need to assign someone or pay someone to help you. The Problems with Medicare and Lien Issues A. Contacting Medicare: Surely there s a short cut, right? We all like shortcuts. The typical the 1 st attempt of contacting Medicare by phone regarding a lien, goes something like: Call all over for numbers...then... Hello...yes...I just want to talk to a person who can discuss the Medicare lien as to my client. Can t you give me a name and a direct number where I can just talk with someone? What s that you say...a form... How long is that going to take? Really, that long? Isn t there any other way? Medicare Secondary Payer Compliance 3.1

B. The Medicare Administrative Process: Paper or Porthole 1. Paper a. Initial contact release form At intake of a new client, you should have clients sign the medical release form entitled Proof of Representation. This form allows you to contact Medicare as to any lien information. b. Example letter to Medicare After you open the file, then forward Medicare the release and letter asking for the amount of conditional payments made regarding this injury. In the letter requesting conditional payment, Medicare asks that the following information be included in the letter to Medicare: Medicare Beneficiary Information -Name -Medicare Claim Number -Gender -Date of Birth -Address for Medicare participant and phone number Case Information -Date of injury/accident; date of first exposure, etc. -Description of injury, illness, or harm -Type of claim (liability; no-fault; worker s compensation) -If worker s compensation, then insurer s name and address Attorney Information -Name -Law firm name -Address and phone number Then, Medicare collects information from the claims processors as to related injuries. See the Medicare Contact lists attached. c. Conditional Lien Notification by Medicare Once Medicare looks for potential liens, then you will be notified and sent Conditional Payment Letter with an itemization of the potential Medicare lien. Be cautious about collecting bills to make sure you know the potential lien. A chart of medical bills submitted that tracks payments, non-covered items, and write-offs are also helpful. Medicare states a conditional payment letter will come approximately sixty-five (65) days after Rights and Responsibilities letter. d. Final Demand Letter and Payment of Lien Once the case is settled or tried, the settlement documentation is sent to Medicare. Medicare then will generate a final demand letter. Payment of the lien is due within sixty (60) days of the date of the demand letter, or interest will be charged. 3.2 Basic Insurance and Negligence Law

2. Medicare porthole. Showing slides on use of Medicare Secondary Payer Portal. C. Formula: How Medicare calculates the lien. The Law A. The Law 411.37 Amount of Medicare recovery when a primary payment is made as a result of a judgment or settlement. (a) Recovery against the party that received payment (1) General rule. Medicare reduces its recovery to take account of the cost of procuring the judgment or settlement, as provided in this section, if (i) Procurement costs are incurred because the claim is disputed; and (ii) Those costs are borne by the party against which CMS seeks to recover. (2) Special rule. If CMS must file suit because the party that received payment opposes CMS's recovery, the recovery amount is as set forth in paragraph (e) of this section. (b) Recovery against the primary payer. If CMS seeks recovery from the primary payer, in accordance with 411.24(i), the recovery amount will be no greater than the amount determined under paragraph (c) or (d) or (e) of this section. (c) Medicare payments are less than the judgment or settlement amount. If Medicare payments are less than the judgment or settlement amount, the recovery is computed as follows: (1) Determine the ratio of the procurement costs to the total judgment or settlement payment. (2) Apply the ratio to the Medicare payment. The product is the Medicare share of procurement costs. (3) Subtract the Medicare share of procurement costs from the Medicare payments. The remainder is the Medicare recovery amount. (d) Medicare payments equal or exceed the judgment or settlement amount. If Medicare payments equal or exceed the judgment or settlement amount, the recovery amount is the total judgment or settlement payment minus the total procurement costs. (e) CMS incurs procurement costs because of opposition to its recovery. If CMS must bring suit against the party that received payment because that party opposes CMS's recovery, the recovery amount is the lower of the following: (1) Medicare payment. (2) The total judgment or settlement amount, minus the party's total procurement cost. The Medicare Secondary Payer statute of 42 U.S.C.A. 1365y(b)(2), reads in part: (2) Medicare secondary payer (A) In general Payment under this subchapter may not Medicare Secondary Payer Compliance 3.3

be made, except as provided in subparagraph (B), with respect to any item or service to the extent that (i) payment has been made, or can reasonably be expected to be made, with respect to the item or service as required under paragraph (1), or (ii) payment has been made 3 or can reasonably be expected to be made 3 under a workmen s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance. *** (B) Conditional payment (i) Authority to make conditional payment The Secretary may make payment under this subchapter with respect to an item or service if a primary plan described in subparagraph (A)(ii) has not made or cannot reasonably be expected to make payment with respect to such item or service promptly (as determined in accordance with regulations). Any such payment by the Secretary shall be conditioned on reimbursement to the appropriate Trust Fund in accordance with the succeeding provisions of this subsection. (ii) Repayment required A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or 3.4 Basic Insurance and Negligence Law

service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. A primary plan s responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan s insured, or by other means. If reimbursement is not made to the appropriate Trust Fund before the expiration of the 60- day period that begins on the date notice of, or information related to, a primary plan s responsibility for such payment or other information is received, the Secretary may charge interest (beginning with the date on which the notice or other information is received) on the amount of the reimbursement until reimbursement is made (at a rate determined by the Secretary in accordance with regulations of the Secretary of the Treasury applicable to charges for late payments). B. Past liens resolution see above. C. Future liens: Medicare set asides. The task of future liens and protection of Medicare is a separate seminar itself. If you have a Medicare recipient with a worker s compensation lien who will need future Medicare services, then you must protect Medicare s interest. This process will require review of medical conditions and likely a treatment plan of what care will be needed in the future. A plan to set funds aside to pay for future care must be implemented. See fact sheet from Medicare Worker s Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide. Medicare Secondary Payer Compliance 3.5

Can Medicare Be Added to a Lawsuit to Speed up Lien Resolution? In order to get an attorney with the power to resolve Medicare lien issues, attorneys had begun adding Medicare to their cases as parties. This method is being objected to by Medicare. See U.S. Department of Justice letter dated November 18, 2013. See also Gobrecht v. McGee, 249 F.R.D. 262 (N.D. 2007). The U.S. Attorney General has begun removing cases to federal court then seeking dismissal under sovereign immunity due to failure to exhaust administrative remedies. Why Should You Care? Attorneys must be mindful of potential liability for failure to protect Medicare. See 42 C.F.R. 411.24(g) wherein it states: (g) Recovery from parties that receive third party payments. CMS has a right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a third party payment. 3.6 Basic Insurance and Negligence Law

Medicare Secondary Payer Recovery Contractor (MSPRC) Contact Medicare Secondary Payer Compliance 3.7

3.8 Basic Insurance and Negligence Law

Proof of Representation Medicare Secondary Payer Compliance 3.9

3.10 Basic Insurance and Negligence Law

Medicare/Coordination of Benefits Letter Medicare Secondary Payer Compliance 3.11

3.12 Basic Insurance and Negligence Law

Final Settlement Detail Medicare Secondary Payer Compliance 3.13

3.14 Basic Insurance and Negligence Law

Electronic Code of Federal Regulations Medicare Secondary Payer Compliance 3.15

3.16 Basic Insurance and Negligence Law

Workers Compensation Medicare Set Aside Arrangements Medicare Secondary Payer Compliance 3.17

3.18 Basic Insurance and Negligence Law

Medicare Secondary Payer Cases Letter Medicare Secondary Payer Compliance 3.19

3.20 Basic Insurance and Negligence Law

Chapter 4: Case Update Prepared By: Patrick W. Allen Casper & Casper Middletown, Ohio Table of Contents Case Update... 1 Case Update i

ii Basic Insurance and Negligence Law

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