Insurance - Stephen L. Cotter and Charles M. Mcdaniel, Jr.

• Publication year: 1999

Insuranceby Stephen L. Cotter^* and

Charles M. McDaniel, Jr.^**

I. Introduction

During this survey period, Georgia appellate courts reviewed the usual number of insurance cases, fine-tuned policy terms and refined the insured/insurer relationship. One area of intense interest concerned limiting subrogation. Another area of interest involved the "limited release" used in uninsured motorist litigation. The Georgia General Assembly primarily focused on managed care, with litigation sure to follow as courts apply the remedial tools. Overall, insurers managed to enforce most adequately articulated policy terms and successfully avoided embarrassing and costly "bad faith" decisions through the timely use of declaratory judgment proceedings.

II. Health & Disability Insurance

Intense and varied activity in the courts and General Assembly reflect the crushing cost of health care and the economic interests of those involved. While national legislation remains stymied, Georgia lawmakers have been busy. The following discussion relates to matters not preempted by the controlling provisions of the Employee Retirement Income Security Act.¹

The Georgia Supreme Court's "complete compensation" decision in Duncan v. Integon General Insurance Corp.² set off a series of actions in the area of subrogation. The supreme court declared, as a matter of public policy, that the complete compensation rule limits the applicability of a reimbursement provision, at least where the insurance contract does not contain an express provision to the contrary.³ The court's decision followed the weight of national authority.⁴ In Jefferson-Pilot Insurance Co. v. Fraker,⁵ the court of appeals interpreted the supreme court's instruction in Duncan requiring "an express provision to the contrary" to mean that the contract must expressly articulate less than complete compensation, rather than merely referring to some formula by which less than complete compensation would be received.⁶

However, in Davis v. Kaiser Foundation Health Plan of Georgia, Inc.,⁷ in which there was a sufficiently clear provision, the court held that Georgia's public policy does not prohibit the enforcement of a policy provision modifying the complete compensation rule.⁸ Of course, effective July 1, 1997, the General Assembly began to regulate this subject matter through Official Code of Georgia Annotated ("O.C.G.A.") section 33-24-56.1 vis-a-vis certain types of medical expense.⁹ The statute does bring some standardization to the treatment of claims falling under its terms.

In Homebuilders Ass'n of Georgia v. Morris,¹⁰ the court of appeals considered subrogation for worker's compensation benefits regulated by O.C.G.A. section 34-9-11.1(b), which requires an injured employee "to be 'fully and completely compensated' for all his economic and non-economic losses before an employer/insurer is entitled" to subrogate.¹¹ "Fully and completely" compensated, at least for worker's compensation subrogation purposes, means without any deduction for comparative/contributory negligence or assumption of the risk.¹² This implementation should significantly diminish employer/insurer subrogation claims in other than clear tort liability situations. In the upcoming year, we should learn whether the "all" in O.C.G.A. section 33-24-56.1 means "fully and completely" under O.C.G.A. section 34-9-11.1.

Uninsured motorist subrogation may not be brought in the name of the carrier. In State Farm Mutual Automobile Insurance Co. v. Cox,¹³ the supreme court reasoned that the insured must participate in its own name to resolve questions of liability.¹⁴ The cumbersome nature of such apparently required actions should discourage uninsured motorist subrogation claims. Indeed, this survey period was a difficult year for subrogors.

The General Assembly was proactive in the area of managed care by trying to level the playing field. One Y2K event should be the implementation of Governor Barnes' substantive amendments to the Patient Protection Act of 1996.¹⁵ The amendments mandate multiple disclosures of information to potential enrollees, access "with reasonable promptness and in a manner which promotes continuity," "medically necessary" services "24 hours a day [and] seven days a week," and reimbursement for emergency and out-of-area services.¹⁶ A "consumer choice option" is also required, with the incremental cost thereof limited by regulated deductibles, copayments, and co-insurance and overall premium differentials, under a varying formula based upon actual cost and various percentage limitations.¹⁷

To help implement these and other rights, the General Assembly established a Consumer's Insurance Advocate within the Governor's Office of Consumer Affairs.¹⁸ The Advocate is authorized to appear in proceedings before the Commissioner and Insurance Department, to appear in administrative proceedings conducted by similar federal regulatory bodies, and to initiate and intervene in related judicial proceedings.¹⁹ The Advocate is privy to and authorized to take information and discovery relating to proposed rate increases and is authorized to involve those experts necessary for the implementation of this office, subject to regulation by the General Assembly.²⁰

Also, the General Assembly enacted a managed care diligence statute to address the failure of a managed care plan to exercise ordinary diligence.²¹ As with products liability, this provision may not be waived or modified by contract.²² This new civil remedy is only available against the managed care entity, not the employer, and punitive damages are prohibited.²³ Prerequisites to maintaining a cause of action under this statute include exhaustion of grievance procedures offered by the managed care entity under O.C.G.A. section 33-20A-5, thirty days written notice of intent to file suit, and agreement to submit to an independent review, if the managed care entity agrees within ten days of receipt of notice of intent to file suit.²⁴

The related Patient's Right to Independent Review Act²⁵ established an independent review process to be administered by the Health Planning Agency.²⁶ Independent review organizations, which must meet alternative definitions and may not be affiliated with managed care entities,²⁷ may register and be assigned to consider particular unresolved conflicts.²⁸ Timely receipt, acknowledgment, processing, replies, and decisions are required.²⁹ The expert reviewer's determination is due within fifteen business days after expiration of all other time limits.³⁰ If favorable to the enrollee, the decision is final and binding on the managed care entity.³¹ Compliance with that decision shields the managed care entity from liability under O.C.G.A. section 51-1-48 for abiding by the decision, but not from liability for acts that occurred prior to the decision.³² If the decision is in favor of the managed care entity, it "shall create a rebuttable presumption . . . that the managed care entity's prior determination was appropriate."³³ The role of the Health

Planning Agency is administrative, and it must provide necessary rules and regulations to implement the Act.³⁴

Two other acts modified various aspects of health care. The first act prescribes confidentiality of pharmacy records, absent a patient's written release or consent.³⁵ It also requires the insurer to pay the undisputed portion of any claim within fifteen working days of receiving written claim for payment of proof of loss.³⁶ It further assesses interest at eighteen percent per annum on wrongful withholdings.³⁷ Similar interest charges are imposed for loss of time benefits with respect to each thirty day period of lost time.³⁸ The second act mandates the insurance reimbursement for prescription contraceptives³⁹ because of a legislative finding that the absence thereof "is largely responsible for the fact that women spend sixty-eight percent more in out-of-pocket expenses for health care than men."⁴⁰

Judicially speaking, the court of appeals in Lancaster v. USAA Casualty Insurance Co.,⁴¹ directly addressed the burden of proof placed on the insured for demonstrating a bad faith denial under O.C.G.A. section 33-4-6 in a medical context.⁴² The court analyzed the various burdens of proof imposed on a plaintiff claiming bad faith in this context.⁴³ Under Hutcheson v. Daniels,⁴⁴ expert testimony is no longer necessary to prove causation if the accident and the treatment are temporally close.⁴⁵ However, as in Lancaster, absent this type of common sense deduction, Eberhart v. Morris Brown College⁴⁶ requires that a fact finder must be presented with medical testimony regarding causation.⁴⁷ Lancaster fell into the latter category and lost. In an interesting concurring opinion, Judge Blackburn discussed the systemic problem in the general use of persons who are not "independent experts."⁴⁸ He encouraged trial courts to exercise their inherent authority to select truly independent experts.⁴⁹ However, the court of appeals, in American Ass'n of Cab Cos. v. Olukoya⁵⁰ found that attacking an opposing expert with a bulk tender of hearsay and irrelevant information sprinkled with admissible evidence was an inappropriate tender.⁵¹ In comparison, the court of appeals in Canada v. Shropshire⁵² admitted evidence of a "personal relationship" between plaintiff's attorney and a witness who was plaintiff's treating chiropractor.⁵³ Both were involved in cases brought by plaintiff for claims arising from two previous car accidents.⁵⁴ Under Shropshire such selective evidence can be admitted, even though it is somewhat irrelevant, to illustrate favor or bias of a witness.⁵⁵ In fact, O.C.G.A. section 24-9-68 permits evidence of a witness' feelings towards a party so a jury can consider and infer the possibility that a witness' objectivity may be clouded by a close relationship.⁵⁶

III. Homeowner's Insurance

Both the Georgia Supreme Court and the Georgia Court of Appeals attempted to clarify particular policy terms and...