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The
KENTUCKY JUSTICE ASSOCIATION
March/April 2015 • Volume 43, Number 2
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2
The Advocate
2/11/15 6:55 PM
Volume 43, Number 2
March/April 2015
10602 Timberwood Circle, Suite 8
Louisville, Ky. 40223-5358
(502) 339-8890 Fax: (502) 339-1780
www.KentuckyJusticeAssociation.org
Publisher
Kentucky Justice Association
Editor-in-Chief
Maya Warrier
Contributing Editors
Paul Kelly
Jeff Adamson
Managing Editor
Pat Edelen
The members of the Kentucky Justice
Association work to ensure that any
person who is injured by the misconduct and negligence of others can get
justice in the courtroom, even when
taking on the most powerful interests.
KJA Staff
Maresa Fawns, Executive Director
MTFawns@KentuckyJustice
Association.org
Cheryl Bennett, Financial Manager
CBennett@KentuckyJustice
Association.org
Monica Daley, Information
Systems Manager
MDaley@KentuckyJustice
Association.org
Pat Edelen, Publications Director
PEdelen@KentuckyJustice
Association.org
Kathleen Johnson, Director of
Public Affairs
KJohnson@KentuckyJustice
Association.org
Amy Preher, Director of Education
APreher@KentuckyJustice
Association.org
Heather Mitchell, Office Manager
HMitchell@KentuckyJustice
Association.org
Contents
Truth and Facts about the Civil Justice System .................................................. 4
By Ron Johnson
Lady Lawyers Make Excellent Jugglers................................................................ 6
By Sheila Hiestand
Insurance Adjuster Liability................................................................................... 8
By Christopher Goode and Kenneth Human
KJA 2015 CLE Seminar Schedule.......................................................................... 11
The So-called ‘Independent’ Medical Examination in Motor
Vehicle Cases—Turning the Table on the Defense Examiner........................... 12
By Hal Friedman
Settlement Releases—You’d Better Know What Your Client is Signing.......... 14
By Jay R. Vaughn
News & Notes....................................................................................................... 17
The Release Document—Some Suggested Forms............................................. 18
By Ann B. Oldfather
KJA Welcomes New Members.............................................................................. 21
Litigating Individual Disability
Insurance Claims—Jurisdiction Concerns........................................................... 22
Michael D. Grabhorn, CLU, ChFC, JD
What You Need To Know About ERISA Liens...................................................... 30
By J. Scott Byerley
Focus Groups: A Powerful Tool for the Litigator............................................... 34
By Patrick Bouldin, Alex Dathorne and Brian Butler
Fighting Allegations of Misconduct in
Unemployment Benefits Appeals........................................................................ 38
by Joe Dunman
League of Justice.................................................................................................. 42
The Advocate (USPS 017-946) is published bi-monthly by the Kentucky Justice Association, 10602
Timberwood Circle, Suite 8, Louisville, Ky. 40223-5358. The subscription rate of $125 is included in KJA
membership dues. Periodical postage is paid at Louisville, KY. POSTMASTER: send address changes to
The Advocate, 10602 Timberwood Circle, Suite 8, Louisville, Ky. 40223-5358.
March/April 2015
3
From the President
By Ron Johnson
Truth and Facts about the Civil Justice System
L
ast month, the ever vigilant Bob Sanders drew
my attention to a ludicrous editorial in the Cincinnati Enquirer penned by a pro-corporation
lawyer from a large defense firm. Michael G. Adams, went
to great lengths to perpetuate myths and lies about the civil
justice system driving businesses out of Kentucky, yet Adams
failed to back any of his allegations with a single shred of
evidence. So at Bob’s suggestion, I decided to give Michael
a little taste of the truth and the facts. Below is the op-ed
that was published. My thanks to the entire Sanders firm,
Vanessa Cantley and Ray Jones, all of whom provided crucial
data or sage advice on the response (and to Maresa Fawns
who wisely edited out the sections where I shared some of
my more personal feelings on this issue).
Adams claims that the civil justice system negatively
impacts job creation because litigation costs Americans about
$250 billion annually. What Adams fails to acknowledge is
that it isn’t the litigation that costs Americans billions of
dollars each year, but the negligent and fraudulent conduct
that caused the litigation to occur in the first place. When
BP floods the Gulf of Mexico with oil or GM conceals a
defect in its ignition switch that causes fatal collisions, the
costs to society are enormous. Preventable medical errors are
estimated to cause at least 400,000 deaths each year in the
United States according to a study published in the Journal
of Patient Safety. Closing the courthouse doors, as Adams
suggests, does not make those losses go away. It just makes
the victims pay for the losses.
A
dams’ central point is that reform is needed
because there has been an explosion of lawsuits that thwart business interests in the
commonwealth, but the fact is, there are fewer lawsuits
now than at any time in recent history. This is documented by the courts’ own data along with study after
study. For example, according to the National Center for
4
The Advocate
State Courts (NCSC), tort cases accounted for just
4.4 percent of all civil cases filed in 2008, and declined by
25 percent between 1999 and 2008. The Bureau of Justice
Statistics (BJS) repeatedly found that the number of tort
cases filed is dropping in state courts.
Yet, while the number of personal injury lawsuits are
falling (thanks in part to safer products as a result of lawsuits), the number of lawsuits between big corporations are
growing.While personal injury lawsuits declined, the number
of business contract lawsuits rose by 63 percent. If it is the
litigation climate he is concerned about, maybe it is all these
big corporations suing each other that is the culprit.
A
dams’ claims that businesses are “fleeing Kentucky for greener pastures,” but the Kentucky
Economic Development Cabinet recently
reported that Kentucky’s efforts to create a pro-business
climate have resulted in “the creation of more than 14,000
jobs in 2013, and over $3.3 billion in new investment—the
fourth straight year for growth.” Additionally, Lexington and
Louisville rank #31 and #41 respectively on Forbe’s list for
“Top 100 Best Places for Business and Careers.”
Adams concludes by claiming that the majority of businesses and citizens in Kentucky favor the so-called reforms
of the legal system that he advocates. Yet, in states where
laws were passed to block access to the courthouse and
shield wealthy individuals and corporations from liability,
there has been no magical solution to this non-existent
problem.We have been told for years that medical negligence
lawsuits are driving doctors out of Kentucky, but according
to the American Medical Association, the number of physicians increased for many years across specialties. In 2009,
the number of physicians rose to another record high, and
continued a trend of an increase in the total number of
physicians outpacing population growth in the U.S. once
again. The number of physicians per 100,000 population is
Board of Governors
at an all-time high of 317. Moreover,
the number of physicians per 100,000
population is 21 percent higher in states
without medical caps on damages than
in states with caps (349 vs. 288). Here
in Kentucky, we have more doctors
per capita than California, Indiana and
Texas, all of which have had medical
tort “reform” measures, such as medical review panels, in place for a decade
or more.
C
ontrary to the claims of
Adams, there is no crisis of
litigation. In Kentucky, we
are fortunate to have good laws enacted
by thoughtful and well-meaning legislators and adjudicated by impartial and
objective judges. The laws in Kentucky
are designed to treat all citizens fairly
regardless of their wealth, status or
social standing. The courthouse doors
remain open to all who seek justice,
and the good lawyers of Kentucky will
continue to zealously represent their
clients. I am proud to be a member of
the legal profession in Kentucky.
Protect the
Seventh Amendment:
“In suits at common law,
where the controversy
shall exceed twenty dollars, the right of trial by
jury shall be preserved,
and no fact tried by a
jury shall be otherwise
re-examined in any court
of the United States,
than according to the
rules of the common
law.”
Executive Committee
President: Ronald E. Johnson, Jr., Fort Wright
President Elect: Paul Casi, Louisville
Vice President: Liz Shepherd, Louisville
Secretary: Phil Grossman, Louisville
Treasurer: Vanessa Cantley, Louisville
Immediate Past President: Joe Satterley, Louisville
District Vice Presidents
First District: Jeffery Roberts, Murray
Second District: Chris Rhoads, Owensboro
Third District: Rhonda Hatfield-Jeffers, Somerset
Fourth District: Kevin Burke, Louisville;
Jennifer Moore, Louisville; Tad Thomas, Louisville
Fifth District: Michael Eubanks, Richmond;
Christopher Goode, Lexington
Sixth District: Penny Hendy, Ft. Wright;
Jay Vaughn, Florence
Seventh District: Will Wilhoit, Grayson
AAJ Governors
Vanessa Cantley, Louisville
*Michael R. Hance, Louisville
Will Nefzger, Louisville
Tad Thomas, Louisville
Tyler Thompson, Louisville
Jay Vaughn, Florence
AAJ Past President
*Peter Perlman, Lexington
AAJ Delegates
Penny Hendy, Fort Wright
Matt Nakajima, Covington
Erwin Sherman, Louisville
Governors-at-Large
David Abney, Frankfort
* Chuck Adams, Lexington
Jeff Adamson, Louisville
John Bahe, Louisville
Greg Belzley, Prospect
* Deedra Benthall, Danville
* Richard Breen, Louisville
David Bryant, Louisville
Gregory Bubalo, Louisville
* Andy Busald, Florence
* A.V. Conway, Hartford
Grover Cox, Louisville
Martha Curley, Louisville
Andy Downey, Louisville
* Steve Downey, Bowling Green
* Larry Franklin, Louisville
* Bill Garmer, Lexington
* J.T. Gilbert, Richmond
* Michael Hance, Louisville
* Richard Hay, Somerset
* Sheila Hiestand, Louisville
Travis Holtrey, Owensboro
Stacy Ivey, Lexington
Ray Jones, Pikeville
* Bill Kathman, Florence
Paul Kelley, Louisville
Tim Lange, Louisville
Ashley Larmour, Louisville
Jennifer Lawrence, Covington
Justin Lawrence, Florence
* Richard Lawrence, Covington
* Alan Leibson, Louisville
* Jim Lenihan, Louisville
Sarah Lynch, Ft. Wright
Lauren Marley, Bowling Green
Rob Mattingly, Louisville
Matt McGill, Bowling Green
* Charlie Moore, Owensboro
* Doug Morris, Louisville
* Doug Myers, Hopkinsville
* Gregg Neal, Shelbyville
Will Nefzger, Louisville
Steve O’Brien, Lexington
Ann Oldfather, Louisville
* Peter Perlman, Lexington
Hans Poppe, Louisville
Jay Prather, Lexington
Aaron Price, Louisville
* Dick Rawdon, Georgetown
Kevin Renfro, Louisville
* Jerry Rhoads, Madisonville
Ken Sales, Louisville
* Bob Sanders, Covington
Delana Sanders, Covington
Justin Sanders, Covington
* Gary Schaaf, Paducah
Mike Schafer Louisville
Jared Smith, Louisville
* Ty Smith, Louisville
Tyler Thmmpson, Louisville
Kevin Weis, Louisville
Nathan Williams, Louisville
* Indicates Past President
March/April 2015
5
By Sheila Hiestand
Lady Lawyers Make Excellent Jugglers
W
ith the leadership of
Jennifer Moore and
Vanessa Cantley, the
KJA Women Lawyers Trial Caucus
was born. The AAJ Women Lawyer’s
Caucus is tremendously successful in
creating terrific bonds between attorneys nationwide and in creating new
networking opportunities. Our own
KJA Women Lawyers recently got together and found we all had one thing
in common: we are excellent jugglers.
And I don’t mean the circus or side
show type. I mean the win America’s
Got Talent type. Let me explain:
As trial attorneys, members of KJA
fight for the rights of their clients and
do their best to be successful in litigating cases to a fruitful conclusion. This
includes not only discovery, depositions, medical proof, trial preparation,
trial, itself, and appellate practice, but
also marketing, fielding thousands of
calls, negotiating liens, keeping the
lights on and general business practices.
For anyone, this is more than enough.
Luckily, most of us have great support
systems and manage to successfully
navigate the rough waters and land
safely on terra firma.
S
o how are women tr ial
lawyers different from their
male counterparts? They
face the same stressors in their practice,
but many have the added pressure and
joy of being moms. This is not to say
dads are not doing their part. It’s just
6
The Advocate
different. I can’t tell you how many
times I have screamed, “I wish I had a
wife!!” By that, I meant, I wish someone
would make dinner, do the dishes, take
the girls to dance and basketball and my
son to football, wash the laundry, make
the beds, nurture the children. You get
the picture. Perhaps it’s an antiquated
picture, but one that has stuck in my
mind. Many of us feel a guilt like no
other. When I’m working, I feel guilty
that I am not giving enough attention
to my children. When I am at home, I
worry that there is a deadline I have
missed or a client I have not called.
A vicious cycle of guilt that beats you
physically and mentally like a jockey
beats a racehorse.
I
have sat in self-pity, believing
I was the only person that
suffered this horrible malady
— until I stood in a living room in December with a roomful of women trial
lawyers. I was not alone. In fact, I’m one
of the lucky ones. I’m not a single parent. My children are healthy. I only have
to bring home the bacon and fry it up
in a pan. Some other folks then have to
run to doctor’s appointments or worry
whether they can pay the bills. Despite
all the guilt and stress, I watched in
awe as each of these lady lawyers stood
with grace, elegance and love of their
profession and family. They were all
juggling, but not like the uncoordinated
kids at soccer camp: like beautiful, fluid
professionals. They acknowledged the
level of difficulty, yet they took it all in
stride. This is not to say there are not
occasional tears, or near breakdowns.
It was merely a testament to the fact
we are all in this together, and it will
all be well.
I write this not to praise women
lawyers as some miraculous group of
water walkers, rather as an acknowledgment to our younger female lawyers
that we all sometimes feel like we are
treading water, that we have been there,
are currently there and will be there for
a long time. Most importantly, I write
this as an encouragement that we rely
on each other for support. Pick up the
phone and call one another when things
become overwhelming. Invite a fellow
attorney to lunch or even coffee and let
her talk while you listen. While we all
love to watch a good juggler, we need
to be there for each other when one of
the balls drops.
T
hank you to all the great
trial lawyers out there,
both men and women. I
hope we can all take at least one step
back and appreciate the many things
we all do so well, and forgive ourselves
for the things we do not. Good luck
and Godspeed.
— Sheila Hiestand is a patner in McCoy
and Hiestand. She is dedicated to helping
women and their families through the very
difficult process of personal injury claims.
March/April 2015
7
By Christopher Goode and Kenneth Human
Insurance Adjuster Liability
F
or more than a decade now, Kentucky’s Eastern
and Western United States District Courts have
viewed the potential tort liabilities of insurance
adjusters domiciled within the state very differently. It is
important for attorneys to understand these conflicting
approaches, why they exist, and how they can be made to
co-exist, in the event that you and/or your clients succumb
to improper conduct by an insurance company. Successfully
naming a resident adjuster may prevent your claims from
being aired in a more defense-friendly federal forum. Recent
opinions from both the Western and Eastern Districts of
Kentucky provide further guidance on this evolving issue,
further indicating that we may be entering a new frontier of
insurance company/adjuster liability in the commonwealth.
Being the master of his complaint, plaintiffs often make
claims against adjusters as a corollary to their bad faith claims
against insurance companies.1 A problem arises, however,
when such a claim is removed to the Western District. While
the Eastern District routinely remands these cases due to
the Kentucky residency of the adjuster,2 the Western District
takes a far different approach. As far as the Western District
is concerned, an insurance adjuster cannot be liable for
common law or statutory bad faith under Kentucky law.
Therefore, the Kentucky citizenship of the adjuster will be
ignored for purposes of removal under a “fraudulent joinder”
theory.3 The court’s consistent application of this doctrine
is made all the more remarkable by the fact that a litigant’s
motive for joining the non-diverse party is considered “immaterial” to the fraudulent joinder inquiry.4
The split between the courts is due to differing interpretations of the Supreme Court of Kentucky’s decision in
Davidson v. Am. Freightways, Inc.5 The question that arises out
of the decision is whether insurance adjusters are “persons or
entities engaged in the business of insurance” that are subject to claims of bad faith.6 On one hand, dicta in Davidson
noted that Kentucky’s insurance statutes were not designed
to regulate “persons who are neither insured nor engaged in
the business of entering into contracts of insurance.”7 On
8
The Advocate
the other hand, Davidson also holds that the Unfair Claims
Settlement Practices Act applies to “only those persons or
entities (and their agents) who are engaged… in the business
of entering into contracts of insurance.”8 Remand opinions
issued by the Eastern District routinely cite this ambiguity in
holding that Kentucky law remains ambiguous as to whether
bad faith claims may lie against adjusters. The Western District has evidently decided that there is no ambiguity at all.9
Until the Sixth Circuit and/or Kentucky’s appellate
courts provide further clarity regarding the bad faith liability of adjusters under Davidson, it appears such claims will
not be allowed to proceed in the Western District. But this
presupposes that bad faith is the only cause of action capable
of holding insurance companies and their adjusters accountable for their improper settlement practices. Several recent
opinions indicate that both the Western and Eastern District
Courts may have reached a consensus as to what other claims
of adjuster liability are permitted under Kentucky law. And
all they needed was a bad set of facts to rally against.
E
nter Shelter Mutual Insurance Company. In
the pending matter of Adkins v. Shelter Mutual Insurance Company,10 discovery revealed the
company’s decade-long practice of settling personal injury
claims of minors without court approval.11 In exchange for
a typically nominal sum, the company would require a minor’s family member (usually unrepresented) to execute a
document that purported to be a final and binding release.12
Last year, Adkins was granted leave to amend her complaint
to account for these newly discovered facts, contending that
the handling of her claim was the result of a coordinated and
fraudulent scheme meant to deprive Shelter policy holders
and third party beneficiaries the full exercise of rights and
benefits afforded them under the laws of the commonwealth.13 Among her newly approved claims, in addition to
bad faith, were claims of fraud in the inducement, fraud by
omission and negligence/gross negligence.
The Adkins court’s sanctioning of negligence and fraud
claims against an insurance company
may eventually change the way Kentucky attorneys hold foreign insurers,
along with their agents, answerable to
the local jurisdictions in which they
sell their policies. Before Adkins, defendants cited decisions like Georgia
Cas. Co. v. Mann,14 United Servs. Auto.
Ass’n v. Bult,15 Motorists Mut. Ins. Co.
v. Glass,16 and Harvin v. U. S. Fid. &
Guar. Co.17 for the proposition that the
Unfair Claims Settlement Practices Act
preempted all other causes of action
premised upon settlement conduct.
Now, Kentucky’s federal courts are
following the lead of Adkins and revisiting these above mentioned decisions
to establish some semblance of clarity
in Kentucky law regarding insurance
company liability.
The first post-Adkins case is R.H.
v. Buffin,18 in which a bad faith claim
against an insurer (Shelter) was brought
in tandem with counts of negligence
and fraud against a resident adjuster.
Judge Thapar of the Eastern District
pointed out that Mann and its progeny
are limited to the context of bad faith
claims and that Kentucky law does
not preclude suing an adjuster and/or
insurance company for other torts not
tied to the bad faith standard.19 Judge
Heyburn of the Western District followed suit in Joy et al. v. King,20 a case
involving nearly identical facts and a
Shelter insurance adjuster. King cited
Buffin and Adkins for the proposition
that Kentucky law is ambiguous as to
whether a plaintiff may sue an insurance adjuster for torts other than bad
faith.21 Both Buffin and King cited
the underlying rationale set forth by
Adkins, that:
“Kentucky’s standard is high…
Bad faith ‘is not simply bad
judgment, it is not merely
negligence.’” These statements
are all true regarding a claim of
bad faith, but Shelter has cited
no authority for its argument
that the UCSPA, KRS 304.12230, “preempts” all negligence
claims. Unlike the UCC, the
UCSPA is a single statute,
rather than a comprehensive
code of law.22
As attorneys, our jobs often bog us
down into the mire of bitter disputes
between parties. In order to fairly
and equitably resolve such disputes,
our courts cannot be in the midst of
a dispute themselves. In this way the
Adkins decision, and the bridge which
has been extended between the Eastern
and Western Districts, are positive developments towards establishing justice
in the commonwealth. Only time will
tell where else this bridge may lead. At
the time of this article’s submission,
there are four other cases involving
Shelter adjusters (in addition to Buffin
and King) with pending motions to
remand before Kentucky’s Eastern and
Western Districts. Once the dust settles,
there may come a time when plaintiffs’
attorneys begin to regularly assert
please contact Cam Mears at
[email protected]
or 1-866-241-6111
March/April 2015
9
common law actions against insurance
companies and/or their adjusters in
the absence of, or in addition to, bad
faith. Given the current climate, there
are seemingly no legal impediments to
doing so should the appropriate set of
facts arise.
— Christopher W. Goode is a trial attorney with Bubalo Goode Sales & Bliss
PLC. While his practice is diverse, he is
committed to only representing injured individuals from automobile wrecks to mass
tort litigation to bad faith claims. He is a
past president of the Fayette County Bar
Association and is a frequent speaker on
legal topics. Chris currently serves as a
District Vice President for KJA.
— Kenneth C. Human is an associate attorney with Bubalo Goode Sales & Bliss
PLC. Human came to Bubalo Goode
Sales & Bliss PLC after working for an
insurance defense firm in Lexington, where
he concentrated on criminal defense and
defending personal injury cases. Kenny
regularly uses his knowledge of defense
practices for the benefit of those injured
clients he now represents.
________________
1 See 14B Charles Alan Wright et al.,
FEDERAL PRACTICE AND PROCEDURE § 3702, at 46 (3d ed. 1998).
2 Collins v. Montpelier US Ins. Co., 2011
U.S. Dist. LEXIS 143224 (E.D. Ky.
2011); Gibson v. Am. Mining Ins. Co.,
2008 U.S. Dist. LEXIS 82205 (E.D.
Ky. 2008) Mattingly v. Chartis Claims,
Inc., 2011 U.S. Dist. LEXIS 106962
(E.D. Ky. 2011); Montgomery v. L&M
Trucking & Equip. Co., 2010 U.S. Dist.
LEXIS 144086 (E.D. Ky. 2010); N. Am.
Specialty Ins. Co. v. Pucek, 2009 U.S.
Dist. LEXIS 104482 (E.D. Ky. 2009).
3 Brown v. A.I.N., Inc., 2008 U.S. Dist.
LEXIS 23714 (W.D. Ky. 2008); Fulkerson v. State Farm Mut. Auto. Ins. Co.,
2010 U.S. Dist. LEXIS 50115 (W.D.
Ky. 2010); Malone v. Cook, 2005 U.S.
Dist. LEXIS 24962 (W.D. Ky. 2005);
Wolfe v. State Farm Fire & Cas. Co., 2010
10 The Advocate
U.S. Dist. LEXIS 126215, *5 (W.D. Ky.
2010); Lisk v. Larocque, 2008 U.S. Dist.
LEXIS 40303, *4 (W.D. Ky. 2008).
4 Roof v. Bel Brands USA, Inc., 2014 U.S.
Dist. LEXIS 146818 (W.D. Ky. 2014)
(quoting Jerome-Duncan, Inc. v. Auto-ByTel, L.L.C., 176 F.3d 904, 907 (6th Cir.
1999).
5 25 S.W.3d 94 (Ky. 2000).
6 Id. at 95-96.
7 Id. at 98.
8 Id. at 102.
9 Delamar v. Mogan, 966 F. Supp. 2d 755,
758-759 (W.D. Ky. 2013).
10 CIVIL ACTION NO. 5:12-173-KKC.
11 Adkins v. Shelter Mut. Ins. Co., 2013
U.S. Dist. LEXIS 50207, 4-5 (E.D. Ky.
2013).
12 Adkins v. Shelter Mut. Ins. Co., 2014
U.S. Dist. LEXIS 118755, 2-3 (E.D.
Ky. 2014).
13 Id. at 3.
14 46 S.W.2d 777, 780 (1932).
15183 S.W.3d 181, 186 (Ky. Ct. App.
2003).
16 996 S.W.2d 437, 451 (Ky. 1997).
17 428 S.W.2d 213, 215 (Ky. 1968).
182014 U.S. Dist. LEXIS 175604 (E.D.
Ky. 2014).
19 R.H. v. Buffin, 2014 U.S. Dist. LEXIS
175604, 12 (E.D. Ky. 2014).
20 CIVIL ACTION NO. 3:14-cv-00704JGH.
21 Id. (“This Court agrees that, construing any ambiguities in Kentucky law
in favor of remand, Plaintiffs have at
least a colorable claim that both King
and Shelter defrauded them by settling
the claims without court approval. At
best, Kentucky law is ambiguous as to
whether a plaintiff may sue an insurance
company and its adjustor for torts other
than bad faith. And Plaintiffs have a colorable fraud claim that King settled the
disputes with Plaintiffs without court
approval, possibly in violation of KRS
§ 387.280.”)
22 Adkins v. Shelter Mut. Ins. Co., 2014
U.S. Dist. LEXIS 118755, 17 (E.D. Ky.
2014).
Keys to Building a Successful
Nursing Home Case
April 2 • Lexington
Downtown Hilton Hotel
Chair: Tad Thomas
David Beats Goliath, Harnessing
the Power of 30(b)(6) Depositions
May 29 & 30 • Louisville
Marriott Downtown
Chair: Tad Thomas
Lawyer Boot Camp
April 17 • Louisville
Brown Hotel
Chairs: Grover Cox/Jared Smith
Big Truck Cases—Learn
from the Truck Stars
June 5 • Louisville
Brown Hotel
Chair: Tim Lange
Ethics at Keeneland
April 23 • Lexington
Keeneland Race Track
Chair: Todd Myers
How to Deal with Complications
in a Personal Injury Case
April 24 • Louisville
Brown Hotel
Chair: Delana Sanders
Settlement, Negotiations
and Bad Faith
May 8 • Louisville
Brown Hotel
Chair: Mike Schafer
The iPad in Law Practice
May 12 • Louisville
KJA Office
Chairs: Brian Cook/Sarah Lynch
How to Develop and Win
an Auto Case
May 15 • Louisville
Brown Hotel
Chairs: Randy Jewell/Nathan Williams
Employment Law (1/2 Day)
May 27 • Louisville
KJA Office
Chair: Garry Adams
Top Ten Things You Need to
Know to Practice an Auto Case
June 9 • Corbin
Cumberland Falls State Park
Chair: Matt McGill
How to Develop and Win
an Auto Case
June 12 • Covington
Marriott RiverCenter Hotel
Chairs: Randy Jewell/Nathan Williams
Top Ten Things You Need to
Know to Practice an Auto Case
June 16 • Paducah
Courtyard Paducah West
Chair: Matt McGill
Top Ten Things You Need to
Know to Practice an Auto Case
June 23 • Bowling Green
Holiday Inn
Chair: Matt McGIll
Understanding Your Case
and Your Jury
June 26 • Lexington
Downtown Hilton Hotel
Chair: Jay Vaughn
Annual Convention
September 9 - 11 • French Lick, Ind.
French Lick Resort
Chair: Ron Johnson
To register
for any
seminar,
gogoto
and
click on Upcoming
CLE
To register
for any
seminar,
to www.KentuckyJusticeAssociation.org
www.KentuckyJusticeAssociation.org and Click
on Upcoming
CLE
March/April 2015
11
By Hal Friedman
The So-called ‘Independent’ Medical
Examination in Motor Vehicle Cases—
Turning the Table on the Defense Examiner
Y
our client comes to you after a car accident.
He or she is off work, has no money (other
than no-fault) to pay medical bills or lost
wages, and the insurance adjustor and you don’t see eye to
eye. You file suit. Now comes the request for the so-called
“independent” medical examination (IME)1 of your client
from defense counsel. Under CR 35 of the Kentucky Rules
of Civil Procedure:
When the mental or physical condition (including the blood
group) of a party… is in controversy, the court in which the action
is pending may order the party to submit to a physical or mental
examination by a physician, dentist or appropriate health care
expert, or to produce for examination the person in his custody or
control. … A court order is technically required for a Rule
35 examination. However in practice, a judge will not likely
deny a request by counsel to allow its selected doctor examine
your client in a motor vehicle case.2 Therefore, most CR 35
examinations are agreed upon.
Many plaintiffs’ lawyers fear the DME of their clients.
Some even object to the unilateral selection by defense
counsel of a CR 35 doctor or examiner. Don’t. Chances are
you won’t succeed in the objection.3
Instead, use the DME as an opportunity for you to
expose unfair and biased defense tactics for the jury at trial.
By thinking “outside the box,” you may find that the selection of the DME doctor by defense counsel actually helps
your case at trial.
Under Kentucky law, you are entitled to all information
that may be relevant to the DME physician’s bias. That
includes, for example:
• The number of DMEs the physician conducts (in a day,
week or month);
• The percentage of work he or she does for defense as opposed to plaintiffs’ lawyers;
• How many times the DME has worked for the defense
lawyer or his or her firm;
•The amount he or she charged for the examination and
related work, among other similar (including preparation
12 The Advocate
of reports and deposition time); and,
• The total amount of the DME’s income from conducting
such examinations and testifying.
Primm v. Isaac, 127 S.W.3d 630 (Ky. 2004).
This list is not exhaustive. For example, you should seek
to obtain prior reports prepared by the DME or depositions
in which he/she has testified differently in other cases with
facts similar to yours.
Further, a DME doctor is to be treated as a paid defense
expert witness for all purposes. All of his/her opinions must
be disclosed to plaintiff’s counsel before trial. CR 35.02.
And, of course, the DME is not a treating physician. As
such, as a matter of law they cannot diagnose any medical
condition, prescribe medication, or treat your client. This
admission is usually prominently disclosed on the first page
of the DME’s report.
Some defense attorneys reflexively (perhaps due to habit
or because they may actually be seeking a biased examination) cycle through the same list of doctors or other medical
experts when scheduling DMEs. Therefore, in many instances you will find that the doctor selected by the defense works
with the same defense counsel on a routine basis; or that the
doctor’s practice consists entirely of handling DMEs and he/
she rarely treats patients; and/or that the doctor focuses his
practice on defense examinations and rarely provides reports
or testimony for plaintiff’s lawyers.
Jurors are smart. It is the author’s experience from polling jurors and from consulting with other plaintiff’s counsel
that during deliberations, a jury will invariably focus on the
fact that the DME is not a treating physician, and that the
defense retained the DME. Typically, the amount of time
the DME spent with the plaintiff (usually an hour or less)
is something on which the jury will focus. Finally, jurors
invariably want to know if the DME contacted or consulted
with the plaintiff’s treating doctors. The idea here is that any
doctor who genuinely wants to provide an unbiased opinion
would contact the treating physician and discuss the patient’s
care with him or her. As you probably
know, this almost never happens.
Many plaintiff’s lawyers obsess or
focus so much on the DME and the
conclusions reached by the paid-forhire doctor that they can go overboard
in cross examination. The worst thing
you can do is get hyper-technical and
bore the jury with a lot of medical terminology that, frankly, holds no interest
for them and which might distract them
from the DME’s bias. Further, the
more time you spend questioning the
DME, the more weight or credibility
you may give the examiner, at least in
the jury’s mind.
If you can help yourself, try a different approach . . . short and to the
point. In the typical motor vehicle
case or premises case, you might limit
yourself to a few very direct questions
that make your point and demonstrate
the bias and untrustworthiness of the
defense.
For example, you might stand up
and start by asking the doctor how
many times he saw your client? The
answer is invariably “one.” Then, confirm that the doctor only saw your client
for a few moments or less than an hour
(the standard in most cases). Have the
doctor confirm the amount he or she
is being paid for his/her report and his/
her testimony. Confirm the percentage of his or her practice devoted to
DMEs and how much of the doctor’s
work comes from defense lawyers. (It
is not uncommon to find certain doctors do virtually no work for plaintiff’s
lawyers.) Then, confirm that the DME
did not prescribe any treatment for your
client because the client was never a
patient. Finally, confirm that although
the DME disagrees with the client’s
physicians, the DME never contacted
those treating doctors to discuss your
client’s condition or their concerns or
diagnosis.
If you use this process, it estab-
lishes quickly in the juror’s mind that
the doctor is biased and cannot be
taken seriously. Certainly, any doctor
who wants to be thorough and fair
would, at a minimum, contact the client’s treating physicians to discuss the
patient’s condition.
In addition, sometimes the DME
states that your client has demonstrated
Waddell’s signs4 or did not give sufficient “effort” during the examination.
On the other hand, the DME might say
that your client is experiencing some
pain, but not as much as your client
says. Don’t let the doctor get away with
this kind of innuendo.
In such a case, you might ask something like this:
Q: So, doctor, are you saying my client is exaggerating his/her pain or
condition for financial gain?
Q: Doctor, what you are saying is that
my client is a liar, right?
Most doctors are loath to call your
client a liar out of concern they will
alienate the jury. If, as is typical, the
doctor states something like “I don’t
know if he is lying. All I know is what
my tests and exam showed.” You scored
points and demonstrated that even the
doctor can’t state with any degree of
authority that your client is being untruthful. The jury is, therefore, entitled
to believe your client.
The above discussion is, by necessity, intended only to be a short outline
of the types of questions you want
to work into the cross of the DME.
There may be more you want to add
depending on what discovery discloses
about the doctor’s practice, financial
incentives and bias. But, you get the
point. If you have done your discovery,
and then conduct a short, succinct
and effective cross, by the time you sit
down, the jury should be convinced of
two things: (1) the examiner cannot
possibly be “independent,” but rather
is biased in favor of the defense; and,
(2) the examiner reached his or her
opinions based on one short visit with
your client and without so much as the
courtesy of contacting your client’s actual treating doctors. On that basis and
that basis alone, the defense is calling
your client a liar.
Naturally, the suggestions contained in this article are generalized.
There may be cases where a full-blown
attack on the doctor’s background,
credentials and the merits of his/her
opinions is warranted by the discovery.
In complex litigation involving difficult
medicine or catastrophic injury, this
type of examination may not be sufficient. However, for most soft tissue
motor vehicle cases, or those involving
lesser injuries, often “less is more” and
I encourage you to consider the suggestions set forth above when preparing
your cross examination of the defense
DME.
In the end, just remember that no
DME is going to admit that he or she
got it wrong. No matter how fancy your
cross and no matter how much detail
about the medicine you get into with
the defense expert, you are likely not
going to get that “Perry Mason” moment with the doctor breaking down on
the stand. Rather, the paid expert will
stick to his or her opinion. So, why try
to obtain that? Your job is to demonstrate the bias of the DME and show
the jury that he or she is little more than
a “gun for hire.” The jury should do the
rest and connect the dots for you.
­ Hal Friedman is a partner of the law
—
firm Cooper & Friedman, PLLC where
he handles all forms of personal injury
claims, from minor soft tissue injury cases,
to catastrophic injury claims, workers compensation and civil rights cases.
_______________
See IME Footnotes on page 21
March/April 2015
13
By Jay R. Vaughn
Settlement Releases—You’d Better
Know What Your Client is Signing
A
s personal injury attorneys, we must stay on top
of a variety of issues such as fee agreements,
client communication, documenting damages,
providing updates to insurance adjusters, dealing with lienholders, negotiating the case, etc. Once the case is settled,
it’s easy to fall asleep at the wheel and coast into the closing statement and disbursement of funds. However, this is
no time to go into autopilot mode. This can be one of the
most crucial stages of the client’s case. Long gone are the
days where a settlement release was a few short paragraphs
where your client agreed to release the person who caused
the wreck in exchange for a sum of money. In today’s settlement world, releases seem to be as lengthy and complex as
corporate merger documents.
How many times have you settled a case, but then received the release that contains terms to which you never
agreed nor would you have ever have agreed? How many
times have you settled a case and received the release—but
not the draft—and then spent the next several days, weeks or
even months arguing over terms in the release? What about
situations where the adjuster won’t accept your changes to
the release despite the law supporting those changes? Have
you ever settled a case at mediation and then had the defense attorney insist on new terms never mentioned during
mediation?
What can you do when these scenarios occur? What
should you do? What is best for your client? While there is
not one answer to solve all of these scenarios, I will provide
some law and ethics opinions to help be your guide.
Old Standard—The General Release
Most releases used to be “general” releases where Party
A agreed to release Party B—and no one else—unless the
release language states that other parties are released. This
is consistent with KRS 411.182(4), which states:
A release, covenant not to sue, or similar agreement
entered into by a claimant and a person liable, shall
discharge that person from all liability for contribu14 The Advocate
tion, but it shall not be considered to discharge any
other persons liable upon the same claim unless
it so provides. However, the claim of the releasing
person against other persons shall be reduced by the
amount of the released persons’ equitable share of
the obligation, determined in accordance with the
provisions of this section.
In Richardson v. Eastland, Inc., 660 S.W.2d 7 (Ky. 1983),
the plaintiff sued Eastland (owner of shopping center) for
injuries received in an automobile collision occurring on
its premises while she was a passenger in her daughter’s
car. Plaintiff settled with her daughter before filing suit and
executed a release discharging her daughter from all claims.
The release did not specify that plaintiff had been fully
compensated nor did it mention other unnamed parties.
In addition, it did not expressly reserve the right to make
further claims against other unnamed parties. Eastland filed
a third party claim against the daughter for indemnity. The
court held that unless a release states on its face that other
parties (not mentioned in the release) are also released or
that the claimant has been fully compensated (i.e., the release constitutes payment in satisfaction of all claims), then
a release shall not provide a defense to a third party not
expressly covered.
Game Changer—The Indemnifying Release
Everything was fine. Cases were settling. Standard form
releases were being signed. Then out of nowhere entered the
indemnifying release, i.e., the game changer. It all started
with Crime Fighters Patrol v. Hiles, 740 S.W.2d 936 (Ky.
1987). In that case, plaintiff Hiles was a customer in White
Castle when he was assaulted by the defendant Cook. Hiles
settled with Cook and entered into a release indemnifying Cook against any future claims. Hiles then sued White
Castle for inadequate security and White Castle filed a third
party claim against Crime Fighters (a security firm hired to
provide security guards at the restaurant) and against Cook
seeking indemnity. Crime Fighters filed
a cross-claim against Cook for indemnity. The parties then learned of the
settlement release with indemnity as
between plaintiff Hiles and third party
defendant, Cook, which had been entered before the lawsuit was filed. The
court held that White Castle and Crime
Fighters were entitled to complete indemnity from Cook because the parties
were not in pari delicto (i.e., they were
secondarily liable). Therefore, plaintiff
who had signed agreement indemnifying Cook from any liability arising
from the assault could not recover from
White Castle or Crime Fighters for
injuries sustained in the assault.
In understanding the implications of an indemnifying release, the
Kentucky Supreme Court provided
guidance in Frear v. P.T.A. Industries,
103 S.W.3d 99 (Ky. 2003), holding that
unless the signing of an indemnifying
release was negotiated as part of settlement, then a party cannot be forced to
sign a release with indemnity. Plaintiffs
sued P.T.A. Industries claiming injury
from exposure to pesticide used at their
home. The parties orally agreed to a
settlement and within a few days, the
agreement was memorialized in writing by a letter from plaintiffs’ counsel.
P.T.A. Industries later submitted a
settlement release titled, “Release and
Indemnity Agreement.” Plaintiffs refused to sign the release because of the
indemnification provision contained
therein. The court stated that “release”
and “indemnity” are related, but, nevertheless distinct, legal concepts. A
release is a private agreement amongst
parties that gives up or abandons a
claim or right to the person against
whom the claim exists or the right is to
be enforced or exercised. Indemnity is
a duty to make good any loss, damage
or liability incurred by another. The
court advised that an agreement to sign
“a release” contemplates only a release
from liability and not indemnification
from third party claims.
Does an indemnifying release really
matter? How can it come back to hurt
your clients? In Abney v. Nationwide,
215 S.W.3d 699 (Ky. 2006), the plaintiffs saw first-hand how an indemnifying release they signed prevented them
from pursuing further claims, despite
not understanding the implications of
indemnity. Abney was a passenger in a
pickup truck owned by Brake and driven by his son, when the Brake vehicle
rear-ended a vehicle driven by Wright.
Just before the accident, Wright either
slowed down or stopped her vehicle
abruptly to retrieve her purse, which
March/April 2015
15
her husband had thrown out of the car.
KFB insured Wright and Nationwide
insured the Brake. Abney settled with
KFB/Wright and executed a release.
They did not have legal counsel present. Abney then filed suit against the
Brakes, who defended on the basis that
any potential claims against them had
already been released. Since plaintiff
signed a release containing language
releasing “all other persons, firms or corporations liable, or who might be claimed
to be liable…” the plaintiff released all
potential tortfeasors, whether part of
the settlement or not.
On December 19, 2014, the Court
of Appeals issued its opinion in Estate
of Butt v. Independence ClubVenture, Ltd.
d/b/a The Electric Cowboy, 2013-CA1400 (to be published), which sent
shockwaves through the KJA listserver.
However, upon reading the opinion,
it became clear that this holding was
just reinforcement of Crime Fighters
and Abney. In Estate of Butt, there was
a tragic collision where three individuals were killed and another injured due
to the negligence of their host driver,
who was intoxicated. All of the occupants of the vehicle had been at The
Electric Cowboy. The plaintiffs settled
with their host driver’s liability carrier
and signed a release which contained
specific language stating that:
It is not the intent of this Release to preclude a cause of
action by [Appellant] against
other potentially responsible
parties, such as liquor stores,
restaurants, bars, and the
like which [Appellant] may
have visited on the evening in
question.
However, the release went on to
state:
Therefore, I hereby covenant
and agree to defend, hold
harmless, and to indemnify
16 The Advocate
Once the case is settled, it’s easy to fall asleep at
the wheel and coast into the closing statement and
disbursement of funds. However, this is no time to go
into autopilot mode. This can be one of the most crucial
stages of the client’s case.
the parties released herein and
their representatives from any
and all claims, liens, causes
of action, demands or suits
of any kind which may have
been brought because of the
accident referred to herein or
for any amount that they or
their representatives may be
hereafter compelled to pay on
account of any claims arising
out of the accident referred to
herein.
Although one paragraph specifically excluded a potential dram shop claim
from being released, another paragraph
included hold harmless and indemnity
language, which had the same effect as
it did in Crime Fighters. The court spent
much of its opinion discussing another
dram shop case, DeStock #14, Inc. v.
Logsdon, 993 S.W.2d 952 (Ky. 1999),
where it was held that the release of
the drunk driver did not effect a release
of the establishment as its liability was
premised not only on the drunk driver’s
negligence, but also on its own alleged
independent act (i.e., dram shop action for independent negligence of its
employees). However, the court stated,
“Except for the amounts paid, the terms of
the settlements are not found in this record,
so it is unknown whether the settlement
documents include the standard “hold
harmless” clause contained in the agreement considered in Crime Fighters Patrol
v. Hiles…” The court went on to state
that, upon remand, if the settlement
release signed by the plaintiff in favor
of Logsdon contained a hold harmless
clause similar to that in Crime Fighters,
then the establishment was entitled to
indemnity. This is exactly what happened in Estate of Butt.
The Exception—PIP Not
Affected by Indemnity When
Not Specifically Designated
Attorneys have always taken the
position that automobile settlements
in Kentucky are exclusive of PIP.
However, many times this is not stated
during negotiations or set forth in the
settlement release. For a few decades
we’ve had two cases explaining the
effect of a tort release on PIP—Ohio
Casualty v. Ruschell, 834 S.W.2d 166
(Ky. 1992) and Holzhauser v. West
American, 772 S.W.2d 650 (Ky. App.
1989). In Ruschell, the court held
that an injured party’s release to the
tortfeasor does not affect the right to
further PIP benefits and that future
PIP benefits are only released if there is
specific language contained within the
release. In Holzhauser, the court held
that the PIP carrier is the real party
in interest and is the only party who
could give the liability carrier a release
for the elements of damages covered
by PIP under the Kentucky Motor
Vehicle Reparations Act (KMVRA).
Basically, the release of the tortfeasor
by the plaintiff has no effect on a PIP
carrier’s right of subrogation against
the liability carrier for payments made
on behalf of the plaintiff.
These cases were decided before
the game changer, before indemnifying releases became the new standard.
So along comes Coleman v. Bee Line
er ad — H
5
Courier Service, Inc., 284 S.W.3d 123
(Ky. 2009), where the plaintiff signed
a release with indemnity and where
the release did not mention the settlement was exclusive of PIP. Citing the
indemnity provision of the release, the
liability carrier demanded that plaintiff
defend it in the arbitration proceeding
with the PIP carrier and make payment,
but plaintiff refused. Through arbitration, the liability carrier settled and paid
the PIP lien but then sought indemnity
from plaintiff who again refused to
pay, so suit was filed. In relying upon
Ruschell and Holzhauser, among some
other cases, the Supreme Court held
that since there was not a specific designation in the release that the PIP claim
was being released and indemnified,
then the plaintiff was not contractually
obligated to indemnify the liability carrier. The issue in Coleman could have
been avoided if “exclusive of PIP” was
a term of negotiations and specifically
included in the release.
— Jay Vaughn is the managing partner
of Morgan & Morgan, Louisville office.
He focuses his practice on personal injury,
automobile and large truck collisions,
wrongful death and nursing home neglect
cases. He is a Board of Governors member of KJA. He may be reached at (859)
899-8117 or [email protected].
News & Notes
Dolt, Thompson, Shepherd &
Kinney PSC announces the addition
of ANTHONY P. ELLIS to the firm.
Anthony brings a wide range of knowledge and experience litigating complex
civil litigation, including pharmaceutical product liability, complex commercial and contract disputes, qui tam
and government fraud claims, medical
negligence disputes and lender liability
claims. His practice at the firm predominately focuses on medical negligence,
personal injury, product liability, class
actions, qui tam and fraud claims and
complex commercial disputes.
JAMES C. HALL, formerly of
Gary C. Johnson, PSC, announces the
opening of James Clayton Hall, PLC.
Hall is a 2010 graduate
of Thomas M. Cooley
Law School and has
practiced exclusively in
the area of personal injury law since that time.
With the formation of
James Clayton Hall, PLC, he continues to focus on personal injury litigation, including auto collisions, medical
negligence, dog bites, premises liability,
and any other injury to individuals by
no fault of their own. He also handles
divorce, custody and adoption cases. The office is located at 153 Patchen
Drive, Suite 67, Lexington, Kentucky
40517. (606) 422-1985; fax (859)
201-1420; james@jamesclaytonhall.
com; http://www.jamesclaytonhall.com.
SARA J. MARTIN joined the
Owensboro office of Rhoads and
Rhoads. A native of
Dawson Springs, Ky.,
Sara graduated with
cum laude honors, from
Nor ther n Kentucky
University’s Salmon P.
Chase College of Law in
May 2014. While at Chase College of
Law, Sara was awarded the 2013 DunnGilday Outstanding Advocate Award
and the 2014 Frank Allen Fletcher
Outstanding Advocate Award, and also
worked for the Department of Public
Advocacy in Northern Kentucky. She
is a member of the Kentucky Bar Association, Kentucky Justice Association
and focuses her practice in the areas of
trial practice, personal injury litigation,
and social security disability law.
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[email protected]
March/April 2015
17
By Ann B. Oldfather
The Release Document—Some Suggested Forms
My first guiding principle for any release is that it should
NOT contain the word “indemnity.” I have a second guiding
principle—it SHOULD contain the word “mutual.” After
that, the drafting of the rest of the terms of a release is all
relatively straight-forward, but it is amazing how something
that should be so straight-forward can be the source of so
many heated debates between counsel. Given the frayed
nerves and bruised egos leftover from settlement discussions,
we would all be best advised to negotiate the release before
we agree on a settlement amount. Hmmm… maybe that
should become my new third guiding principle.
This article gives you some sample paragraphs to consider/use/dissect/improve.1 I encourage you to send a proposed
release to the defense as soon as settlement negotiations
begin, and then stick to your guns. Every defense attorney I
know will try to get as much bang for his settlement “buck”
as humanly possible, resulting in what I call “settlement
creep,” as the same settlement sum covers more and more
concessions from your client.
The Parties
The first step is to define the parties. That may not seem
like much, but it is key. You define who is being released
and/or who is doing the releasing. Consider the following
“standard” format—not that I really think it is “standard”
but defense attorneys will tell you it is:
1.In consideration for the payment of [INSERT] DOLLARS ([repeat amount numeric]), the receipt of which
is hereby acknowledged2, [insertplaintiffs’ names],
(sometimes collectively referred to as “XX3”), do
hereby fully and forever discharge and release [insert
defendants’ names], (sometimes collectively referred
to as “YY4”) its insurers, its past and present agents
and employees, affiliated corporations and successors
in interest from …
The two highlighted groups (insurers and affiliated corporations) are not parties nor are they in the vertical line of
18 The Advocate
any of the defendant entities. It is not written anywhere that
they get a release, and as a matter of fact the same insurer
could insure another non-released defendant, just as an “affiliated corporation” may be a separate defendant. So, watch
that string of nouns the defense tries to include within the
defined term of defendants released.
What is Released
The defined terms of the releasing and released
parties are followed by the actual releasing language.
There is no reason to hold-back; it is indeed your intent
to release every claim your client has against the settling
defendant. So define it fully, but fairly.
… from any and all claims, demands, and causes of action
XX may have as a result of any injuries sustained by
XX [or insert name of child, or deceased (“ZZ”)] arising out of the medical services provided or alleged
not to have been provided to XX or ZZ by YY prior
to the date of this Release. This Release includes, but
is not necessarily limited to, all physical injuries and
damages, including the claim of wrongful death,
alleged or which could have been alleged in the
lawsuit styled [INSERT NAME OF ACTION], pending
in the Jefferson Circuit Court, Division [INSERT],
Civil Action No.[INSERT] (hereinafter “Action”), and
encompasses all types of injuries, whether mental or
physical, direct or indirect, tangible or intangible,
known or unknown, developed or undeveloped,
past, present or future, including attorneys fees and
costs recoverable under statute or rule and all other
damages of any sort.
The material highlighted in red is the operative language
of the claim released, and the remaining verbiage defines the
injuries and damages flowing from that claim as are within
the scope of that release.
Steps Before Case Dismissed
It is our practice to dismiss any punitive claim as
soon as there is a firm verbal agreement. We provide in
the release that none of the settlement sum is for the
punitive claim, since we want to distance the settlement
monies from that claim as much as possible. So, the
first paragraph of our typical Mutual Release ends with
this sentence:
Plaintiffs shall dismiss the claim for punitive
damages before payment of any settlement sum.
The Reservation
The next paragraph should expressly reserve all
other claims. Some would say that this is surplusage,
but Jay Vaughn’s excellent article clearly illustrates why
they are wrong. Here is a typical second paragraph of
a Mutual Release:
2. XX expressly reserve and do not release any and
all other claims, demands, obligations and causes
of action, against any person or entity not identified as YY, and this reservation includes but is
not limited to those claims which could be made
by XX but have not yet been asserted and those
claims asserted by XX against [INSERT], defendants in the aforesaid Action. The release herein
does not in any way operate in the favor of the
afore-named, nor does it in any way operate in
favor of any party other than YY.
The “Other” Release
How often do we hear from the defense that “we
have bought our peace”? Well, they have, and it is equally
true that the plaintiffs have bought their peace. Why
should plaintiffs carry the exposure to a counter-suit
for a year, and why should we as the plaintiffs’ counsel?
Haven’t we bought our peace, too? And why should the
risk of further litigation fall on us and our clients just
because we had to file suit to enforce responsibility?
Paragraph No. 3 should be a release provided by the
defendants5, as follows:
3. In consideration of this Mutual Release, YY does
hereby release and forever discharge XX, their
heirs, successors and assigns, and their attorneys,
from any and all claims and demands of any nature whatsoever related to the filing or prosecution of the Action, and does further release and
forever discharge any and all claims, demands
and causes of action of all sorts, whether accrued
or un-accrued, known or unknown, developed
or undeveloped, past, present or future, including
attorneys fees and costs recoverable under statute or
rule and all other damages of any sort, past, present
or future.
The “No Liability/No Excuses” Cause
Similarly, it’s my view that the “no admission of liability” clause should cut both ways. So for those 99 percent of
defense counsel who want this clause, here is what we end
up using:
4. It is mutually understood and agreed that this settlement is the compromise of a disputed claim. YY’s
agreement to the terms hereof shall not be considered an admission by it of any fault on its part, and
XX’s agreement to the terms hereof shall not be
considered an admission by them that YY is free from
fault.
The Payment6
Be clear about the amount, and the date that it is due.
I kick myself every single time I settle a case without an express commitment of the date by which the monies will be
paid. Anyone who has ever done the same knows the reason
for the kicking.
5.YY shall deliver the settlement sums to Plaintiffs’
counsel by a cashier’s check, wire funds transfer or
otherwise immediately available funds payable to
[insert payee(s)] on or before noon on [date]. The
settlement sums are in consideration of the physical
injuries and wrongful death as alleged by XX.7 None
of the settlement sum is paid for punitive damages.8
None of the settlement sum is in consideration of the
confidentiality provisions incorporated at Paragraph
7, below, the consideration for which are the reciprocal promises contained therein. Upon delivery of the
settlement sums, XX shall execute an Agreed Order
Dismissing Settled, all parties to pay their own costs.
Liens, Governmental and Otherwise9
Liens are, hands down, the hardest part of any settlement. Let’s be clear about why a defendant cares. For
Medicare liens, the defense is legitimately entitled to a
commitment that the Medicare lien will be paid. But that
is it, at least as of today.10 A plaintiff may have contractual
or statutory obligations to Medicaid or non-governmental
providers, but that is not a defendant’s problem. Of course,
providing that monies will be escrowed, and that proof of
satisfaction of a governmental lien shall be provided is a far
cry from an indemnification. It is and should be enough
March/April 2015
19
that a defendant has been fully released by the plaintiff for
any liability due to these expenses (as is the case, see release
terms above); when a defendant asks for anything else (with
the potential exception of Medicare liens), it is overkill.
Consider that an insurance contract is an indemnity
contract. Premiums are paid, and risks are assumed by insurance companies after careful underwriting considerations.
The indemnity could reasonably be assumed to include
costs of defense. Do you really want your lay-person plaintiff
becoming the equivalent of an insurance company and take
on these responsibilities?
Of course you don’t. However, sometimes the practicalities of the deal require that you do so, and when the extent
and limitation of the liability to the defendant is within your
client’s control, it is not the worst thing in the world.
This sample clause limits any indemnity to health care
liens, and health care liens only:
6. Plaintiffs shall indemnify and hold harmless YY and
YY’s insurer from any and all claims, suits, thirdparty claims, cross-claims, liens or any other actions
or causes of action, known or unknown, presently
or at any future time, made by any person, entity or
governmental agency arising out of, or attributable to
XX’s medical or related expenses incurred as a result
of the acts or omissions of YY.
Keeping Secrets
Rarely is there a legitimate reason for the overlyrestrictive confidentiality clause favored by most insurance
companies. We only agree to confidentiality when it is in
our client’s interest or when the client truly insists on the
settlement and it can’t be accomplished any other way. More
often than you might think, defendants are willing to forego
a confidentiality clause.
If you are going to have one, consider that lay people
often need to discuss settlement terms with loved ones. Here
is a sample clause:
7.The amount of this settlement sum shall remain
confidential among the parties and their attorneys,
except as to tax advisors, financial planners and
advisors, structured settlement brokers, special
needs trust advisors and trustees, immediate family
members, as required by law, as required by court
order or subpoena, or as necessary in dealing with
subrogors or actual or claimed lien holders and their
contractors, including Medicare and Medicaid. The
parties acknowledge that any court filings or other
dissemination of the terms of this Mutual Release as
are required by law or as are excepted by the forego20 The Advocate
ing provisions shall not constitute a violation of this
confidentiality agreement.
Boilerplate
Here is some sample concluding language:
8. All agreements and understandings between the parties are embodied and expressed herein and the terms
of this Release are contractual and not a mere recital.
XX and YY acknowledge that in entering into this
agreement, no representations, promises, or advice
have been given to them by counsel for the other.
This Agreement has been, and shall for all purposes
be deemed to have been, negotiated, executed, and
delivered within the Commonwealth of Kentucky,
and the rights and obligations of the parties shall be
construed and enforced in accordance with, and governed by the laws of the Commonwealth of Kentucky.
This Agreement is binding upon, and shall inure to
the benefit of, the parties hereto and their respective
agents, employees, representatives, officers, directors,
subsidiaries, assigns, heirs, and successors in interest.
Signatures
For some reason, it makes defendants happy to see this
in all caps at the end of the Mutual release, preceding the
signatures:
WE UNDERSTAND THAT THIS IS A FULL AND FINAL
RELEASE OF ALL CLAIMS THAT WE MIGHT HAVE
AGAINST EACH OTHER, OUR AGENTS OR EMPLOYEES.
WE HAVE CONSULTED OUR ATTORNEYS AND SIGN
THIS ON ADVICE OF COUNSEL.
WITNESS the signatures of the parties hereto on the
date indicated.
There is no need for counsel to sign, unless you just
want to, but otherwise there should be a signature line and
date for each party individual, or entity.
— Ann Oldfather concentrates in plaintiffs’ personal injury,
product liability, medical negligence, legal malpractice, appellate
matters, commercial litigation and complex family law. Ann served
as a Special Justice on the Kentucky Supreme Court, authoring
both majority and dissenting opinions.
_______________
1 An electronic set of the sample provisions is available at https://
www.kentuckyjusticeassociation.org/docdownload/681564 (log
in to view the document.)
2 No releases until money in hand. Period. Otherwise, the docu-
3
4
5
6
ment is a “Settlement Agreement,” and
should begin: “Upon receipt of the payment of [INSERT] DOLLARS ([repeat
amount numeric]) as required by the
terms of Paragraph 4, below, ….”
This convention allows a global search
and replace of the defined terms.
See above ftn. 2.
This requires signatures by the defendants. It can take some time to obtain
those, and no one wants to delay receipt
of funds while that happens. As long as I
have it in writing that the document has
been approved, I am willing to execute
the Mutual Release document, receive
the funds and disburse them, with the
promise that I will receive a fully executed Mutual Release in due course.
This article does not address language
used when some or all of the payment
is structured.
7 This term is important to buttress your
client’s tax-free treatment of a personal
injury payment.
8 This term is important to avoid the
claim that some portion of the settlement is taxable as consideration for the
confidentiality terms.
9 This article does not address prudent
practice by plaintiff’s counsel in managing liens as part of the settlement
disbursals.
10Some would argue that it is also a
reasonable request for the defense to
demand proof of satisfaction of Medicaid liens, but I am not convinced that
a defendant has any direct liability to
Medicaid under any circumstances.
KJA Welcomes New Members
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Louisville.
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IME Footnootes
Continued from page 13
1 There is rarely such thing as a truly
“independent” medical examiner.
Rather, as is commonly understood by
practitioners, most medical examiners
used by defense counsel are routinely
retained by the defense bar precisely
because they are conservative in their
reports or, in some cases, outright biased against your client. Therefore, this
article (and our firm generally) refers to
CR 35 examinations as “defense” medical examinations (DME). You should
treat them as such in your own practice.
2 Where damages for personal injury are
sought in a case, this clearly puts the
mental or physical condition of your
client in controversy and subjects him/
her to a DME.
3 Allegations that a physician chosen by
a defendant to perform an IME was a
well known “defense doctor” with an
economic interest in doing IMEs was
not sufficient to justify denial of the
defense request, as those matters were
more appropriately raised through cross
examination. Sexton v. Bates, 41 S.W.3d
452 (Ky. App. 2001).
4 Waddell’s signs are a group of physical
signs (identified by simulation and distraction tests among others) which are
used by many DME’s to support a conclusion that your client is malingering
or engaged in symptom magnification
for financial gain.
Have a tough case?
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March/April 2015
21
Michael D. Grabhorn, CLU, ChFC, JD
Litigating Individual Disability
Insurance Claims—Jurisdiction Concerns
W
hile the majority of disability insurance is
obtained through group insurance, there
are a large number of individual disability
insurance policies in force (ranging from policies sold in the
late 1980s, to early 1990s, to today). Individual disability
policies are commonly marketed and sold to professionals,
with a heavy emphasis on physicians—given their specialized
occupation and their need to insure a significant monthly
income. However, individual policies are also marketed to a
wide range of white collar and blue collar occupations and
incomes. Just as individuals with group disability insurance
often need legal assistance to obtain their benefits, so do
those with individual disability policies.
The key to reviewing a legal inquiry for a disability insurance claim is to recognize whether the insurance is group
(and likely subject to ERISA) or individual (typically subject
to state law). Discerning group from individual coverage is
not usually difficult.The problem is determining subject matter jurisdiction. This can be a game changer. The applicable
law affects everything from which court will hear the case
(state or federal), to the ensuing litigation process (discovery, evidentiary standards, summary judgment standards,
right to a jury trial) to damages (a right to compensatory or
bad faith relief, as opposed to only equitable relief). Do not
assume that because it is an individual policy, ERISA does
not apply. The financial benefits of ERISAfying an insurance
policy are too great.
Beware Insurer Efforts to
ERISAfy the Insurance Policy
Simply because a disability policy is individual versus
group, do not assume it is automatically free from ERISA
preemption. The insurance industry recognizes the significant advantages obtained by ERISAfying a personal insurance policy—from limited discovery, to limited damages,
to limited review. By way of example, in the mid 1990s,
Provident Life & Accident1 issued an “Internal Memorandum” referred to as the McCall Memo2 in which Provident
22 The Advocate
went on the offensive of ERISAfying their personal disability
insurance policies …
A task force was established to promote the identification of policies covered by ERISA and to initiate
active measures to get new and existing policies
covered by ERISA. The advantages of ERISA coverage in litigious situations are enormous: state law is
preempted by federal law, there are no jury trials,
there are no compensatory or punitive damages,
relief is usually limited to the amount of benefit in
question, and claims administrators’ may receive a
deferential standard of review.
The economic impact on Provident from having
policies covered by ERISA could be significant. As
an example, Glenn Felton identified 12 claim situations where we settled for $7.8 million in the aggregate. If these 12 cases had been covered by ERISA, our
liability would have been between zero and $0.5 million.
While the McCall Memo was issued in 1995, some 20
years ago, its message remains the same today as it did then.
Insurers continue to search for legal arguments to ERISAfy
personal disability insurance policies.
The court well understands why Provident wants
to place the ERISA fence around Rosen’s state law
claims. It would be well worth the effort if Provident
could meet its burden of proving that ERISA affords
Rosen his only remedy …3
The Insurer’s Denial Letter Is Not
Determinative of Whether ERISA Applies
Insurers do not segregate ERISA and non-ERISA
disability claims among their staff. There is not a dividing
wall in the claims departments. Rather, disability claims
Continued on page 24
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Continued from page 22
are processed in the same unit, using
the same personnel and the same
stock form letters. As a result, it is not
uncommon to see a denial letter that
contains ERISA language even when
the insurance policy is not subject
to ERISA. Whether this misinformation is by intent or not, the result is
the same—claimants assume their
legal rights and remedies are severely
restrained. Moreover, claimants have
a difficult time finding legal counsel.
When this sort of letter is reviewed
by attorneys unfamiliar with ERISA
litigation (aside from a desire to avoid
it), it is not uncommon for them to
decline representation based on the
letter’s ERISA proclamation—thereby, depriving claimants of their right
to counsel. Fortunately, the courts
have recognized that such misleading
statements (that ERISA applies) can
support a finding of bad faith.
In Hangarter v. Provident Life &
Accident Ins. Co., 373 F.3d 998 (9th
Cir. 2004), the appellate court upheld
a $7.6 million verdict, of which $5 million was for punitive damages. The Court
held that the insurer engaged in a “biased investigation” and that the “letter
terminating Hangarter’s benefits was
misleading, deceptive, and fell below
industry standards as it incorrectly
advised Hangarter about her rights
under the policy.”4 Notably, the Court
took exception to the insurer’s false
representation that ERISA applied and
held the misrepresentation supported
the jury’s finding of bad faith and resulting punitive damage award.
Finally, the termination letter
incorrectly stated that the policy
was gover ned by ERISA. If
true, this would have meant
that Hangarter had no available remedies under state law,
including punitive damages.5
24 The Advocate
In 1971, the National Association
of Insurance Commissioners (NAIC)
issued a model “act relating to unfair
methods of competition and unfair
and deceptive acts and practices in the
business of insurance.”6 In 1997, the
NAIC issued an updated model act
titled “Unfair Claims Settlement Practices Act.”7 Since that time, with the
exception of Mississippi and Nevada,
each state has adopted the model act or
a similar version.8 By way of example,
Kentucky’s insurance code provides
protections for this sort of misrepresentation (that ERISA governs the policy)
of a claimant’s rights. By statute, it is
considered an unfair claims settlement
practice for an insurer to “misrepresent
pertinent facts or insurance policy
provisions.”9 With that in mind, do not
assume the denial letter is correct.
First, document the file. Confirm
the insurer’s position as to whether it
contends ERISA is applicable, and if so,
on what basis. If in litigation, make sure
to obtain a copy of the insurer’s training
materials and/or claims manual. These
internal documents typically provide
express procedures and instructions for
claims personnel to follow in determining whether ERISA applies. When it
is apparent the claims person did not
comply with the insurer’s own internal
guidelines, you can use these materials as evidence of the insurer’s failure
to adequately train and supervise its
claims personnel. The following is an
example of an insurer’s internal Q&A
guidelines for its claims staff.
Q: What if I don’t know if the claim
considered ERISA or Non-ERISA?
Should I just use the ERISA language?
A: No, you should not. As the insuring company, we are obligated to
do our best to determine this. By
placing ERISA specific language
in letters for a Non-ERISA claim,
it could be construed that we are
misleading the claimant and putting
him/her through our Appeal review
process when he/she truly does not
have to. The same goes for Appeal
Acknowledgement, Uphold on
Appeal, etc. There is no acceptable
“catch all” wording.
Alternatively, where an insurer’s
guidelines are sparse or non-existent,
this serves as additional evidence of a
failure to train. By way of example, in a
recent deposition, the claims manager
confirmed that claims personnel do
not receive any training on determining whether ERISA applies. Instead,
claims staff uses an Internet resource:
www.freeerisa.com. The problem is this
website does not provide anything
other than copies of Form 5500 filings.
Simply because an entity files, or does
not file a Form 5500, is not conclusive.
While an insurer may argue an individual insurance policy is subject to
ERISA because a Form 5500 was filed,
this is not enough. Even if the insurer
has treated the insurance policy “an
ERISA plan with respect to government filings, its mere labeling of the
plan should not determine whether
ERISA applies. Allowing this could lead
to a form of ‘regulation shopping.’”10
“Labeling an otherwise exempted plan
as an ERISA plan” does not make
it so.11 At best, an insurer’s filing of a
Form 5500 “is voluntarily undertaken
as a precaution and does not in and of
itself render the policy an ERISA governed
plan.”12
Second, if the insurer remains firm
that ERISA controls the claimant’s
legal rights, investigate further and
continue to document the file. The
insurer’s duty of good faith “continues
during any litigation” and the unfair
claims settlement statute applies with
equal force to “conduct occurring after
the commencement of litigation.”13 Conduct after commencement of litigation
includes an insurer raising ERISA as
an affirmative defense or removing the
case to federal court based on ERISA
preemption.
Practice Tip: Express preemption, commonly referred to as
the “relates to” preemption, is
an affirmative defense and cannot provide the basis for subject
matter jurisdiction.14
Again, depositions narrowly tailored to confirming the basis, or lack
thereof, for asserting ERISA can
strengthen claims for punitive damages (whether statutory, common law,
or consumer protection). Make the
corporate witness provide the factual
basis for asserting ERISA. Further,
have claims staff confirm that ERISA
affects their investigation and decision
making process. This provides support
for a jury finding the claim denial unreasonable—thereby opening the door
to bad faith. Further, these sorts of
admissions support a jury finding the
claims process to be inherently flawed
and biases. This finding opens the door
to bad faith damages even where the
contract claim fails. “Under Kentucky
law, however, it is irrelevant whether
the defendant could have denied [an]
application in good faith if the evidence
shows that the defendant, in fact, reviewed the application in bad faith.” 15
Third, make sure the insurer is actually the entity that actually processed
the claim. Of late, there is a trend for
insurance companies to sell disability
insurance on their paper (i.e., with
their name and logo) only to outsource
their entire claims process. In some
instances, these third-party claims
processors are also insurers—subject
to direct claims for bad faith. Alternatively, if they are not insurers, they
are subsidiaries of insurers—typically
the same insurance company who is
reinsuring the original insurer’s liability
under the disability policy. Identifying
whether claims administration has been
outsourced is important, especially if
ERISA is alleged in the denial decision.
The insurer that issued the policy remains liable for the acts of its staff and
its agents, including third-party claims
processors. The fact that the insurer
rubber-stamps the third-party decision,
to deny a claim and to represent ERISA
applies, supports the conclusion that
the insurer failed to properly train and/
or supervise.
Remember, the insurer bears the
burden of proving ERISA applies.
Because ERISA preemption is an
affirmative defense, the insurer bears
the burden of proof.16 The same burden
applies if the insurer invokes ERISA as
the basis for removal to federal court.
An insurer “seeking removal bears the
burden of establishing its right thereto.”17 An insurer cannot, “merely by
injecting a federal question into an action that asserts what is plainly a statelaw claim, transform the action into
one arising under federal law, thereby
selecting the forum in which the claim
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March/April 2015
25
shall be litigated.”18 Furthermore, any
doubts as to whether ERISA applies
must be “resolved against removal.”19
For ERISA to apply, an insurer
must prove a “plan” exists. In enacting ERISA, Congress
defined an “employee welfare benefit
plan” to include:
... any plan, fund, or program
which was heretofore or is
hereafter established or maintained by an employer or by an
employee organization, or by
both, to the extent that such
plan, fund, or program was established or is maintained for
the purpose of providing for
its participants or their beneficiaries, through the purchase
of insurance or otherwise ...
benefits in the event of sickness, accident, disability, death
or unemployment....20
This language identifies five material elements an insurer must prove in
order to successfully invoke ERISA.
Courts have generally identified these
required elements as: (1) a “plan,
fund, or program”; (2) established or
maintained; (3) by an employer or by
an employee organization, or by both;
(4) for the purpose of providing … disability … benefits; (5) to participants
or their beneficiaries.21 The absence of
any single element precludes ERISA
application. Moreover, even if all five
elements are present, ERISA does not
apply if “no employees or former employees participate.”22
One of the most problematic elements is ERISA’s definition of “employee” and “participant.” The U.S.
Supreme Court found this language to
be “uninformative … [and] completely
circular.”23 As the agency responsible
for enforcing ERISA, the Department
of Labor issued binding regulations
26 The Advocate
defining an “employee benefit plan”
to exclude “any plan ... under which
no employees are participants covered
under the plan.”24 Further, while a business owner is considered an employee,
that distinction alone is insufficient to
implicate ERISA. The “plan” would
have to cover not just the owner, but
also “one or more employees other than
the business owner.”25
In the context of individual disability insurance policies, it is generally a
good idea to have the policy, premiums
and all related correspondence come
directly to the individual. This certainly
undermines any serious contention
that the insurance policy is part of an
ERISA plan. However, it is common
for the insured professional to have the
premium billed to their business.
Practice Tip: Disability insurance benefits are typically
taxable, or non-taxable, depending on how the premium
was paid. If the insurance
premium is deducted as a business expense, the benefits are
likely taxable. Conversely, if
the insurance premiums are paid
with after-tax dollars, the benefits
are likely tax-free.
The reason for doing so is simple.
Insurers routinely offer a “list-bill” discount from 10 percent to 15 percent.
A list-bill refers to the situation where
one or more individuals in the same
business (i.e., medical doctors) agree
to allow the insurer to bill their respective premiums by sending a list-bill to
the practice.
… an acceptable employee
group of three or more employees of an employer can apply for and be issued individual
disability income policies to
each of said employees. By applying as an employee group,
each applicant receives a 10%
discount on his individual
premium payments.26
Again, the incentive is the premium
discount. The problem is that when a
claim is filed, the insurer argues the
individual policy is part of a plan and
is therefore subject to ERISA.
UNUM contends that the “list bill”
policy of which Shaw’s agreement was
part is an “employee welfare benefit
plan” under ERISA. Because this claim
is both a ground for UNUM’s motion
for summary judgment, and a response
to Shaw’s challenge to the court’s own
jurisdiction, UNUM carries the burden
of demonstrating ERISA’s applicability.27
Unfortunately, insurers have been
successful in convincing federal courts
that the list-bill mechanism created an
ERISA plan. Vigilance is required to
rebut this expected argument, including requiring the insurer to prove that
the discount was anything more than
an administrative convenience for its
billing department (e.g., association endorsements, actuarial pricing, and form
filings with state regulators). Expect the
insurer to file a self-serving affidavit
concerning the list-bill discount. Insist
on discovery to rebut the affidavit.
Having submitted incomplete
versions of the disputed documents
in support of its response brief,
Defendant cannot now expect
the Court to deny Plaintiff ’s
request for limited discovery of
the remainder thereof. At the
very least, Plaintiff is justified
in expecting that there may be
something in the remainder of
these documents that could be
useful in responding to Defendant’s brief. Furthermore,
having offered Taylor’s affidavit
in support of its argument that
Continued on page 28
“Experience litigating and trying cases for both plaintiffs
and defendants in a wide range of cases over a lot of
years helps me be a credible, effective mediator or
arbitrator for both plaintiffs and defendants.”
— Robert F Houlihan, Jr.
Experience Makes the Difference.
• Plaintiff Medical
Negligence
• Legal Malpractice
(Plantiff & Defense)
• Partnership Disputes
(Plantiff & Defense)
• Personal Injury
(Plantiff & Defense)
• Business & Property
Valuation
• Estate/Will Litigation
(Plantiff & Defense)
• Commercial Litigation
(Plantiff & Defense)
• Business Torts/Fraud
(Plantiff & Defense)
• Plaintiff Products
Liability
• Fiduciary Duty
(Plantiff & Defense)
• Employment Litigation
(Plantiff & Defense)
• Defamation
LAWYER PEER RATINGS
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March/April 2015
7:41
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Continued from page 26
UMC is not a governmental
entity, Defendant cannot deny
Plaintiff the opportunity to depose
him.28
Finally, aside from the list billing
argument, assuming there was a plan,
the plan must be in existence at the time
of the claim. It is common for insureds
to change employment and to leave or
close businesses over the course of their
careers. But, they typically retain the
individual insurance policy and simply
change the address of record (for billing, correspondence, etc.). When this
insured files a claim, the debate then
becomes whether there is still a “plan”
or whether there was a “conversion.”
Again, in order for ERISA to apply,
there must be a plan—a current plan.
Absent an ongoing administrative scheme,
there is no plan and ERISA does not
apply.29
Practice Tip: Beyond the space
of this article, an additional
means of avoiding ERISAfication is to demonstrate the
insurance policy falls within
the ERISA “safe harbor.”30
Next Issue—Litigating Disability Insurance Claims: Proof and
Contractual Issues
— Located in Louisville, Kentucky,
Michael D. Grabhorn is a recognized
national authority in the area of life
and disability insurance, involving both
state law and ERISA. Mr. Grabhorn’s
practice is limited to representing insureds, individually and on a class basis.
Mr. Grabhorn litigates insurance cases
locally and across the country. He has
intimate knowledge in the design, marketing, and workings of insurance products. Prior to establishing his law firm,
Michael spent more than 17 years working in the insurance industry. He may be
reached at (502) 244-9331.
28 The Advocate
_______________
1 Provident Life & Accident has since
merged with Paul Revere and Unum.
Today, the combined entity is referred to
simply as Unum and is one of the largest, if not the largest, disability insurer
in the country.
2 See http://www.cfids-me.org/disinissues/
discandal.pdf (“Trust Law as Regulatory Law:The Unum/Provident Scandal
and Judicial Review of Benefit Denials
under ERISA”).
3 Rosen v. Provident Life and Accident Ins.
Co., 2015 WL 260839 at *6 (N.D.Ala.
Jan.21, 2015).
4 Hangarter v. Provident Life & Accident
Ins. Co., 373 F.3d 998, 1010-1011 (9th
Cir.2004).
5 Id.
6 State Farm Mut. Auto. Ins. Co. v. Reeder,
763 S.W.2d 116, 118 (Ky. 1988).
7 http://www.naic.org/store/free/MDL-900.
pdf
8 Id.
9 KRS 304.12-230(1).
10 Stern v. International Business Machines
Corp., 326 F.3d 1367, 1374 (11th
Cir.2003).
11 Miller v. PPG Industries, Inc., 278 F.
Supp.2d 826, 831 (W.D.Ky.2003).
12 Johnson v. Watts Regulator Co., 1994 WL
258788 at *4 (D.N.H.1994), aff’d, 63
F.3d 1129 (1st Cir.1995).
13 Knotts v. Zurich Ins. Co., 197 S.W.3d
512, 517 (Ky.2006) (“[W]e hold that
KRS 304.12-230 applies both before
and during litigation.”).
14 Metropolitan Life Ins. Co. v. Taylor, 481
U.S. 58, 64 (1987) (“ERISA pre-emption, without more, does not convert a
state claim into an action arising under
federal law.”).
15 Estate of Riddle v. S. Farm Bureau Life Ins.
Co., 421 F.3d 400, 409 (6th Cir.2005).
16 Gordon v. NKC Hospitals, Inc., 887
S.W.2d 360, 362 (Ky.1994).
17 Her Majesty the Queen in Right of the
Province of Ontario v. City of Detroit, 874
F.2d 332, 339 (6th Cir.1989) (citing
Wilson v. Republic Iron & Steel Co., 257
U.S. 92, 97-98 (1921)).
18 Caterpillar, Inc. v. Williams, 482 U.S. 386,
399 (1987).
19 Wilson v. USDA, 584 F.2d 137, 142 (6th
Cir.1978).
20 29 U.S.C. § 1002(1).
21 Donovan v. Dillingham, 688 F.2d 1367,
1371 (11th Cir.1982).
22 McLain v. Unum Life Ins. Co. of America,
2013 WL 3242842 * 3 (N.D.Ala., June
21, 2013) (quoting Slamen v. Paul Revere
Life Ins. Co. 166 F.3d 1102, 1104 (11th
Cir.1999))(emphasis added).
23 Raymond B. Yates, M.D., P.C. Profit
Sharing Plan v. Hendon, 541 U.S. 1, 12
(2004) (quoting Nationwide Mut. Ins. Co.
v. Darden, 503 U.S. 318, 323 (1992)).
24 29 C.F.R. § 2510.3–3.
25 Hendon, supra note 23 at 6.
26 Shaw v. Unum Life Ins. Co., 1989 U.S.
Dist. LEXIS 5346, 1 (D.N.J., May 15,
1989).
27 Id. at *4.
28 Milby v. Liberty Life Assur. Co., 995 F.
Supp. 2d 745, 747 (W.D.Ky.2014).
29 Fort Halifax Packing Co. v. Coyne, 482
U.S. 1, 11 (1987).
30 29 C.F.R. § 2510.3-1(j). Under the Safe
Harbor provision, ERISA does not apply
to insurance programs in which:
(1) No contributions are made
by an employer or employee
organization;
(2) Participation in the program is completely voluntary
for employees or members;
(3) The sole functions of the
employer or employee organization with respect to the program are, without endorsing
the program, to permit the insurer to publicize the program
to employees or members,
to collect premiums through
payroll deductions or dues
checkoffs and to remit them
to the insurer; and
(4) The employer or employee
organization receives no consideration in the form of cash
or otherwise in connection
with the program, other than
reasonable compensation,
excluding any profit, for administrative services actually
rendered in connection with
payroll deductions or dues
checkoffs
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March/April 2015
29
By J. Scott Byerley
What You Need To Know About ERISA Liens
What is ERISA?
Cause of Actions Available Under ERISA
With the enactment of the Employee Retirement Income
Security Act (ERISA) in 1974, Congress set about protecting
employees enrolled in employer sponsored benefit plans and
pensions.1 The need arose after Studebaker, an automobile
manufacturer, closed its plant in South Bend, Indiana, in
1963, leaving around 7,000 employees in dire straits because
of an inadequately funded pension.2 Appropriately, Congress
recognized the growing need to protect employees, and so
began America’s swim through the often-murky waters of
ERISA.3
Despite the best of intentions, enacting laws that make
absolute sense—with clear and unambiguous language—
almost never happens, not even with the simplest of laws.
In addition, the abundance of case law surrounding ERISA
clearly affirms, ERISA is by no means a simple act of legislation. Even the U.S. Supreme Court agreed, stating in
Great-West Life & Annuity Insurance Co. v. Knudson, one
of its many landmark ERISA decisions, that ERISA is “a
comprehensive and reticulated statute.”4 Accordingly, to
understand the rights and remedies available under ERISA,
you must look to the statute and then to the extensive case
law interpreting it.5
Historically, in deciphering ERISA, the circuit courts
wrestled with the right of reimbursement for ERISA plans.
This article focuses on the pertinent issues that arise when
the beneficiary of an employer-sponsored plan recovers
financially for injuries in a personal injury settlement.
Once it’s been determined that the plan is governed
under ERISA, the fiduciaries, participants and beneficiaries
to the plan must look to §502(a)10 for their available causes
of action. ERISA §502 (a)(1)(B) allows a “participant” or
“beneficiary” to bring an action (1) “to recover benefits due
under the plan,” (2) “to enforce rights under the terms of
the plan,” or (3) “to clarify his/her rights to future benefits
under the terms of the plan.”11 The §502 (a)(1)(B) claim
may be brought in either state or federal court.12 ERISA
§502(a)(3) allows a “fiduciary, participant, or beneficiary”
(1) “to enjoin any act or practice which violates the terms
of the plan,” or (2) “to obtain other appropriate equitable
relief to either redress violations or to enforce the provisions
of ERISA or the terms of the plan.”13 With respect to actions
brought under ERISA §502(a)(3), the statute grants federal
courts exclusive jurisdiction over these claims.14
Is It an ERISA Plan?
To assert a cause of action under ERISA, §502 (a)(3)
(B),6 first determine that the plan is subject to ERISA. A
“plan” under ERISA is defined as an “employee welfare benefit plan” or “employee pension benefit plan.”7 The ERISA
governed plan must be established by the plan sponsor and
maintained by a “written instrument.”8 Lastly, while almost
all private employer plans are subject to ERISA, church,
governmental and state plans are generally excluded.9
30 The Advocate
Fully-Insured Versus Self-Funded Plans
A fully insured health plan exists when the employer
has purchased a group insurance policy from a health plan,
insurer or HMO. In the case of a fully insured health plan,
the most significant distinction that applies is that both
state and federal laws apply to its reimbursement rights.15
However, a self-funded ERISA plan is a plan sponsored by
the employer and funded by contributions directly from its
employees.16 Typically, self-funded plans use a third party
administrator (TPA) to administrate claims under the plan.
Although the TPA assists the plan in processing and paying
claims, it is still the self-funded plan that bears the risk for the
claims.17 Self-funded plans also preempt state laws relating
to employee benefit plans or regulate insurance.18 Federal
laws, however, still apply to a self-funded plan’s respective
recovery rights.19
The Written Plan Document
To determine the plan’s rights, the contract between the
plan and the beneficiary is the first place to look.20 The con-
tract, the Master Service Agreement
(MSA) or Summary Plan Description
(SPD), usually has a provision which
spells out the rights of each party to the
contract in the event of a third party
accident involving the plan beneficiary.
It is also important to confirm that
you have the actual “plan document”
and not only the SPD.21 In Cigna v.
Amara, the Court found that the CIGNA SPD was not a “plan document.”
Moreover, the Court held that only the
terms of a plan are enforceable, not
terms of summaries.22
With respect to contractual provisions addressing a plan’s recovery
rights, these contract clauses (Reimbursement Provisions) have countless
names: Third Party Liability, Subrogation and Reimbursement, Reimbursement, Injuries from an At-Fault Third
Party, just to name some that you
typically find. Yet despite their many
headings, the language, and therefore
the legal application, often varies substantially from one employer sponsored
plan to another. Moreover, what Reimbursement Provisions expressly state in
the MSA or SPD is very important to
“who gets what,” if and when an injured
plan member or beneficiary does, in
fact, make a recovery for their injuries.
Critical Questions
when Looking to the
Health Plan’s Contract
• Does the plan provide a statement of
funding status?
• Is there a Reimbursement Provision?
• Is the plan entitled to a recovery regardless of whether or not the plan
member has been fully compensated
(made whole doctrine)?
• Is the plan limited to a portion of the
settlement i.e., first party coverage,
third party coverage, or that portion
identified as medicals?
• Is the plan member entitled to a
reduction in the reimbursement
amount for their attorney’s fee (common fund doctrine)?
• Is the plan language clear and unambiguous?
• Is the plan language silent on any of
these pertinent issues (made whole,
common fund, source of recovery)?
What Has The U.S. Supreme
Court Said About ERISA,
Contracts And Reimbursement?
In addition to looking to the plan
language, it is imperative to understand
the implications of recent holdings by
the U.S. Supreme Court. In Sereboff v.
Mid Atlantic Medical Services, the Court
affirmed the Fourth Circuit Court of
Appeals’ holding that an action seeking enforcement of the health plan’s
reimbursement rights can be equitable.23 This allowed for the equitable
remedy of constructive trust against the
identifiable settlement proceeds in the
possession of the plan member.24 One
question, however, the Court left open
in Sereboff was whether a plan member
in any such action would be allowed equitable defenses against the plan, such
as, made whole, unjust enrichment or
double recovery.
More recently in U.S. Airways, Inc.
v. McCutchen, the Court answered the
question of whether equitable defenses
would be allowed against the plan, as
well as how a plan’s contractual Reimbursement Provision apply when
an injured beneficiary recovers from
a third party.25 The Court, in a 5-4
decision, affirmed the importance of
plan terms as controlling a plan’s right
of reimbursement.26 In doing so, the
Court also allowed the application
of equitable principles for the “gap”
scenarios where the plan is silent or
ambiguous.27
In McCutchen, 28 an employee,
James McCutchen, participated in and
received benefits from a plan sponsored
by his employer, U.S. Airways. While
covered under the plan, McCutchen
sustained significant injuries in a motor vehicle collision for which the plan
paid $66,866 in medical benefits.
McCutchen filed a lawsuit against the
third party who caused the accident. He
recovered $110,000 in total, including a
recovery from the third party’s liability
policy and his own underinsured motorist coverage. In order to pursue the
lawsuit, McCutchen agreed to hire his
attorney for a 40 percent contingent attorney’s fee.When the case settled, after
paying his attorney’s fees of $44,000,
McCutchen recovered $66,000. Unfortunately for McCutchen, the plan
asserted a contractual reimbursement
right against his recovery for the full
amount of benefits it paid under its
contract. In doing so, the plan relied
on the Reimbursement Provision in
its contract with McCutchen, which
provided the following:
If [the plan] pays benefits
for any claim you incur as
the result of negligence, willful misconduct, or actions
of a third party…[y]ou will
be required to reimburse for
amounts paid for claims out
of any monies recovered from
third party, including, but not
limited to, your own insurance company as a result of
the judgment, settlement or
otherwise.29
Ultimately, the Court in McCutchen held that equitable principles
couldn’t override the clear terms of an
ERISA plan.30 In other words, when an
ERISA plan has clear language in its
written plan document, an injured plan
beneficiary is not able to assert equitable defenses (i.e., made whole, common fund, unconscionability, double
recovery, etc.) to preclude or reduce the
plan’s recovery.31 However, the Court
held that where the contract is silent or
March/April 2015
31
there is a “gap” in the language, then equitable principles
may be allowed to fill the “gap” in those situations.32
things, you’ll be in the best strategic position to protect your
client’s recovery from the health plan.
What is the Fallout of Sereboff,
McCutchen and the Long Progeny of
ERISA Decisions When It Comes to Your
Client’s Personal Injury Settlement?
— J. Scott Byerley, managing partner of Lien Resolution Partners,
spent the last 16 years working for one of the nation’s largest cost
containment companies. In addition to resolving liens for health
plans across the country while acting as Director of Litigation with
Gibson & Sharps, a law firm solely focused on subrogation and
reimbursement, Scott also managed attorneys and cases throughout the U.S. It is Scott’s significant experience and expertise in
healthcare lien resolution that he is now employing on behalf of
plaintiff’s attorneys and their clients.
Truthfully, McCutchen was a particularly positive result
for those plans with very clear and strong terms of reimbursement in the written contracts. These plans address
all of the key issues: made whole, common fund, what part
of the recovery they are entitled to recover from, priority
of payment, and so on. McCutchen also alerted plans with
weak language to update and make the necessary changes to
strengthen their contracts. The reality stands that a carefully
drafted Reimbursement Provision equates to money, and
now more than ever, with the rising cost of, well, just about
everything involved with healthcare, health plans seek every
dollar they can get their hands onto.
For plaintiff’s attorneys and their clients, the impact is
just as great with respect to self-funded plans. That’s why
you need to do all of your homework to protect your client’s recovery. Be sure to accurately ascertain the type(s) of
plan(s) that have paid benefits on behalf of your client for
injuries sustained in the accident for which a recovery has
or will be made. To do so, you can’t always rely on the plan
or their recovery agent to provide the correct contract or
status of the plan when first asked. Make sure you hold the
plan administrator accountable when necessary to provide
you with everything you are entitled to under 29 U.S.C. §
1024(b)(4).33 Check the plan document for language which
sets forth its funding status and/or obtain an affidavit of
funding status from the plan, as well as review the annually
filed Form 5500.
Lastly, although it can be timely and a bit of an obstacle
course, investigating and understanding the plan’s rights to
your client’s recovery is paramount to resolving an ERISA
lien effectively. You don’t want to wait until the end to find
out what your client may have to pay back to the plan. It’s
also all about positioning yourself with the health plan or the
recovery agent as early as possible so you can get a sense of
their intent with respect to the lien. Require them to produce
the documents your client, as a beneficiary is entitled to, and
to properly validate the plan’s status and to digest the plan
document and the plan’s recovery rights. If you do these
32 The Advocate
_______________
1 29 U.S.C. §1001 et seq.
2 Sarah Steers, ERISA History, Jurist, (Oct. 4, 2013, 12:01 PM),
http://www.jurist.org/feature/2013/10/erisa-history.php.
3 Id.
4 Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S.
204, 209 (2002).
5 Id.
6 § 502(a)(3), 29 U.S.C. § 1132(a)(3).
7 29 U.S.C. § 1002 (3).
8 29 U.S.C. § 1102 (a)(1).
9 ERISA § 4, 29 U.S.C. 1003.
10 29 U.S.C. § 1132.
11 ERISA §502(a)(1)(B), 29 U.S.C. §1132(a)(1)(B).
12 Id.
13 Id.
14 Id.
15 FMC Corp. v. Holliday, 498 U.S. 52 (1990).
16 John MacDonald, Health Plan Differences: Fully-Insured vs.
Self-Insured, Employee Benefit Research Institute, www.ebri.
org/.../ffe114.11feb09.fin.
17 Id.
18 FMC Corp., supra note 15.
19 Id.
20 U.S. Airways, Inc. v. McCutchen, 133 S. Ct. 1537 (2013).
21 Cigna v. Amara, 131 S. Ct. 1866 (2011).
22 Id.
23 Sereboff v. Mid Atlantic Medical Services, 126 S. Ct. 1869 (2006).
24 Id.
25 U.S. Airways, Inc. v. McCutchen, 133 S. Ct. 1537 (2013).
26 Id.
27 Id.
28 Id. at 1543.
29 Id.
30 Id.
31 Id.
32 Id. at 1550.
33 ERISA § 104(b)(4).
Kentucky Lawyer Assistance Program




March/April 2015
33
By Patrick Bouldin, Alex Dathorne and Brian Butler
Focus Groups: A Powerful Tool for the Litigator
“The will to win is not nearly so
important as the will to prepare
to win.” — Vince Lombardi
A
s both trial attorneys, and as litigation consultants, Coach Lombardi’s words ring very true
with the authors of this article.While courtroom
skills are essential, the work lawyers engage in before entering
the courthouse often makes the difference between winning
and losing. Having tried more than 250 cases collectively,
we know through experience, focus groups are a powerful
tool for any litigator who wishes to be successful at trial, or
reach the best settlement for his or her client.
It is impossible in one article to address all the advantages and strategies involved in conducting focus groups
and mock trials, however, we will outline some of the key
benefits focus groups offer the litigator. We have gleaned
these insights from conducting focus groups on our own
cases and from running focus groups as litigation consultants
for other trial attorneys.
Preparation
Possibly the biggest benefit of conducting a focus group
is the requirement that the trial attorney organize the case
in a trial-like fashion. A pre-trial focus group forces the attorney to take all the evidence, theories and ideas revolving
around a case, and put pen to paper to arrange them in a
presentable fashion. No matter how well-organized an attorney or case may be, any lawyer who tries cases knows
substantial work is done when transitioning a case from the
pre-trial phase to the trial phase. Doing this essential work
early, in preparation for a focus group, ensures the attorney
has sufficient time to truly prepare.
Such early organization offers tremendous returns. Who
of us has not had that sudden feeling of panic when you realize you have forgotten something, or a new idea forms, while
you are putting a case together for tria? This is immediately
34 The Advocate
followed by the question of whether there is enough time to
make the necessary changes. Doing a pre-trial focus group,
or more than one, gives the trial attorney breathing room in
this area, in addition to discovering new ideas gleaned from
the focus group.
Presentation
As litigators, we can give arguments off the cuff with little
or no formal preparation. However, noted public speaking
guru, Arch Lustberg, often said that when possible, one needs
to practice an important speech before formally delivering
it: “The words must cross your lips prior to you delivering them
to your audience.You will be amazed what you learn, and how
much better you will ultimately present your speech.”
Pre-trial presentation of your case to a focus group helps
in exactly the same way. Like any good practice, a mock trial
focus group helps from the basic (reviewing discovery); to the
practical (preparing exhibits); to the intangible (discovering
that something “just doesn’t sound right”); to the essential
(finding out what trial-like jurors think about your case).
As long-time professors in Trial Advocacy at the
Brandeis School of Law at the University of Louisville, the
authors encourage students to practice exercises like mock
opening statements and closing arguments. We suggest students present to a classmate, a friend, or in front of a mirror, if no one else will listen. There is a very good reason for
this advice—it works. This same logic applies to presenting
your case to a focus group. In Mr. Lustberg fashion, you will
have your case cross your lips before presenting it to your
ultimate audience. In our experience, the work you put into
a focus group, and what you learn in the process, is always
valuable. Always!
Weaknesses In Your Case
As litigators, we are naturally competitive. We want a
fantastic verdict. If not a fantastic verdict, we want to reach
a terrific settlement. In short, we want to win our case. Many
people care if you win or lose at trial, or what type of settle-
ment you achieve, particularly you and
your client.
However, no one cares if you
“win” your focus group. Thus, you do
not want to skew the case in front of a
focus group in your favor just to “win
it.” That is like having a basketball
scrimmage against a team of patsies just
before the championship game.
Additionally, no matter how objective we seek to be with our own cases,
we are often too close to the subject
matter to be truly objective. We often
focus so much on certain aspects of
the case, new information and ideas
—both good and bad—materialize less
frequently.
Thus, one of the main objectives a
trial attorney should have in conducting
a focus group is to find out the weaknesses of your case. In order to achieve
this goal, the focus group team must
concentrate on the primary reason to
conduct a focus group: to hear what
the neutral people have to say about a
neutral presentation of the case.
Attempting to be neutral does not
mean skewing the facts absurdly in
favor of the opposing side, but it does
mean taking a long hard look at the opposition’s case, and presenting it every
bit as fairly as your side. To achieve this
goal, we often consider the following:
• If a fact hurts your case, and it is
questionable whether it will be admitted into evidence at trial, consider
erring on the side of presenting it to
the focus group.
• Similarly, if a fact helps your case, but
it is unclear whether it will be admissible at trial, consider excluding it (at
least initially) from the presentation.
• Consider trying to “remove personality” from the case as much as possible. No one can perfectly recreate
opposing counsel’s personality, or
even that of the judge, so instead
concentrate on presenting a fair and
understandable outline of the case.
• Consider having your litigation
consultant recruit mock jurors who
might tend to lean towards siding
with the opposition’s case, thus hearing what “bad jurors” might think
about your case. (What they say may
surprise you!)
These are just a few of the strategies we use to help discover the weaknesses of a case. Of course, we also want
to hear what the focus group jurors
think about the strengths of our case!
In our experience, however, presenting
the strengths of the case seems to come
much more naturally.
Focus Group Format
As every case is distinct, we do
not believe there is a one size fits all
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March/April 2015
35
approach to conducting focus groups.
Although we have preferences in what
we generally think works best, as litigation consultants, we evaluate the case
and listen to the attorney/client’s needs
first. This includes consideration of the
following:
• In which phase of litigation is the
case?
• How far out from trial is the case?
• Is a mock trial focus group best, or
would it be best to concentrate on
just one or two issues?
• Should the focus group consider both
liability and damages, or just one of
the two?
• Do we want to present the case to
one focus group, two, more?
There is no way to outline here
every question to consider as each case
and each attorney/client is different.
The most common type of focus
group we conduct is a mock trial. We
typically act as moderators and have
two attorney/clients play lawyers for
each side of the case. However, depending on the individual aspects of
the case, we as the moderators might
instead present everything to the focus
group. Regardless of the format, again,
it is crucial to deliver an even-handed
presentation of the case.
To that end, we recommend factual
summaries be read to the focus group,
as opposed to being ad-libbed. As Trial
Advocacy professors, we would flunk
any student who read an opening statement or a closing argument verbatim.
However, with a focus group, reading
from a prepared script does at least four
essential things:
• Requires the attorney to write down
the essential facts of the case (both
the good and bad ones)
• Ensures all important facts are submitted to the focus group
• Removes the intangible factor of
personality from the presentation
36 The Advocate
... you do not want to skew the case in front of a focus
group in your favor just to “win it.” That is like having
a basketball scrimmage against a team of patsies just
before the championship game.
• Ensures that the facts are read in
plain English, and not in legalese or
in case-specific jargon that might not
be understood by a lay person.
We also suggest our clients use
some very simple, but useful, tools such
as a time line and a “cast of characters”
sheet. Having a blowup of these items
(or a handout), allows the focus group
jurors to more quickly digest the essential facts, and refer back to these
documents for important names, dates
or other information as they work.
By work, we do mean work. In our
experience, the vast majority of focus
group jurors take the job very seriously
and puts forth an excellent effort. It
is not uncommon for the authors to
receive follow up calls or emails from
jurors days or weeks after a focus group,
submitting additional thoughts or questions about the case.
Finally, in a mock trial focus group,
once the case is submitted, we require
the focus group jury to reach a unanimous verdict, regardless of whether the
case is criminal or civil. Of course, while
criminal cases require a unanimous
verdict in Kentucky and federal courts,
state civil cases in Kentucky do not require such. However, having the focus
group jury deliberate to a unanimous
verdict even in these cases requires the
jurors to deliberate at length. While the
ultimate “verdict” is a very important
piece of information, you might lose a
potential wealth of additional information if the focus group jury, for example,
instantly reached a nine to three verdict
without much deliberation. At a mini-
mum, you wouldn’t hear the reasons
certain jurors voted against you.
The Litigation Consultant
At trial skills seminars, we are often
encouraged to “brain-storm” our cases
with friends, family and colleagues. The
goal of brainstorming, similar to that
of a focus group, is to step outside our
personal view of a case and seek different opinions, ideas and suggestions.
Adding an experienced litigation
consultant to your team is an extension
of this timeless advice. The goal is not
for the litigation consultant to take over
the case, or to dominate the process. To
the contrary, the consultant’s goal is
to listen closely to the attorney/client,
make suggestions and assist from that
moment forward with running focus
groups or other case-related matters.
It adds tremendous value to your case
when you team up with a professional
who has vast experience trying cases,
working with focus groups and handling all the intangibles of a successful
litigation practice. In short, you want a
partner who is battle tested in and out
of the courtroom and who brings that
experience to bear on behalf of you and
your client.
— Patrick Bouldin, Alex Dathorne and
Brian Butler are trial attorneys—with
more than 60 years of combined litigation
experience—who have tried more than 250
cases collectively, in both state and federal
courts. They are also the founders of the
litigation consulting firm, Trial In Focus,
LLC. (www.trialinfocus.com).
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March/April 2015
37
by Joe Dunman
Fighting Allegations of Misconduct in
Unemployment Benefits Appeals
A
frustrated person walks into your office with
two big problems. The first, she was recently
fired from her job. The second, she applied for
unemployment benefits but her claim was denied because
her former employer filed a protest, alleging that she was
terminated for “misconduct connected with the work.” The
former employee denies any kind of misconduct, but she
needs your help. She wants to appeal the ruling but doesn’t
know what to do.
A Kentucky worker fired from his job may apply to the
Department for Workforce Investment Office of Employment
and Training for unemployment benefits. As part of an initial
determination of eligibility made by the Division of Unemployment Insurance, the worker’s former employer is notified
of the claim and given fifteen days to respond “to qualify for
potential relief of charges to [its] reserve account.”1 In other
words, to protest the worker’s claim so the employer doesn’t
have to pay unemployment benefits.
Of the 160,597 claims for benefits filed by Kentucky
workers in 2013, employers protested 58,718 of them (approximately 37 percent).2 Protests resulted in 34,814 denied
benefits claims (a denial rate of 59 percent).3 The rate of
denial was even higher at 66 percent in 2012.4
There are numerous bases for protests, but one of the
most common is “misconduct connected with the work.”5
Kentucky case law broadly defines misconduct as a “willful and wanton disregard of the employer’s interests.”6
More narrowly, KRS Chapter 341 provides several specific
examples of misconduct, which include (among others), a
“knowing violation of a reasonable and uniformly enforced
rule of an employer,” “refusing to obey reasonable instructions,” and “reporting to work under the influence of alcohol or drugs or consuming alcohol or drugs on employer’s
premises during working hours.”7
What all this means is that an employee terminated
for bad behavior at work is not eligible for unemployment
benefits. Employer protests on that basis frequently result
in an initial denial of worker claims.
38 The Advocate
However, within fifteen days of receiving notice of a
denial, a worker/claimant may file an appeal to a referee
appointed by the Unemployment Division.8 That means
the frustrated person who just walked into your office is
not out of luck yet. He or she still has a chance at getting
unemployment benefits.
The notice of appeal can be simple. It need only identify the claimant, the case number, and include a statement
that the claimant seeks to appeal the determination denying
benefits. It is not necessary to brief the claimant’s facts and
arguments. If represented by counsel, the notice should
include counsel’s contact information and a clear statement
of representation.
The Unemployment Division then schedules a telephonic hearing and sends a copy of the claimant’s file roughly
ten days prior along with a witness list (for distribution to
the hearing officer and the employer) and instructions for
requesting subpoenas for witnesses if necessary.
H
earings are conducted by telephone and are
normally scheduled for one hour. A typical
hearing functions like a mini trial, complete
with witness testimony elicited by the hearing officer, the
submission of documents and other evidence and cross examination of witnesses by the parties or their representatives.
The rules of evidence are “relaxed,” meaning most exhibits
and testimony submitted are allowed, including hearsay.
It is the employer’s burden to prove that the former
employee was terminated for misconduct.9 The standard of
proof is a preponderance of credible evidence.10
Your primary responsibility, as the representative of a
claimant appealing the denial of benefits for misconduct, is
to play defense by attacking the credibility of the employer’s
representative and/or witnesses. Listen closely to the questions asked by the hearing officer and to the answers received,
cross examine aggressively, and carefully rehabilitate your
client’s testimony however necessary.11
Though a worker can be terminated for any lawful reason or no reason at
all under Kentucky law, unemployment
benefits cannot be so easily denied. Remember that misconduct is more than
just a disagreement between a boss and
his or her her report. It is more than a
difference in opinion or a clash of personalities. Many employers (especially
small businesses without competent
human resources officers) protest
benefits claims out of spite. Spite is an
insufficient reason to deny a benefits
claim, and this point should be emphasized during cross examination and in
the closing statement. The employer
must prove that the employee engaged
in conduct specifically prohibited under
KRS 341.370(6) or otherwise in bad
faith against the employer’s interests.
Usually between two to four weeks
after the appeal hearing, the hearing
officer files a decision including “find-
ings of fact, conclusions of law, and [a]
final order with respect to the worker’s
eligibility” for benefits.12
I
f you’ve screened your client
well, you sufficiently prepared
for the hearing and you conducted effective cross examinations of
employer witnesses, you have significantly improved your client’s chance to
win the appeal.13
Overall, the success rate on appeal
is roughly equal for employers and
claimants. In 2013, employers won 30
percent of their appeals while claimants
won 29 percent.14 In 2012, the success
rates were 32 percent and 29 percent,
respectively.15 Unfortunately, the Unemployment Division does not track
the number of claimants represented
by counsel during their appeals, nor
their win rate.
A referee’s decision is not neces-
sarily the end of the road, however.
The losing party may seek further appeal to the Unemployment Insurance
Commission within fifteen days of the
date the referee decision is mailed.16
Though it is not required, it is generally good practice to submit a written
summary statement or brief on behalf
of your client should there be an appeal
to the Commission. The brief should
include a summary of the testimony
and evidence entered (or attempted to
be entered) into the record during the
appeal hearing, the standard of review
and an argument why the referee’s ruling was correct or incorrect.
The Commission has significant
discretion. It can affirm, modify, set
aside or reverse a referee decision.17
It can order a new hearing or direct
the taking of additional evidence. 18
However, the Commission’s decision is
primarily confined to “evidence previ-
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March/April 2015
39
ously submitted” to the referee in the
original appeal hearing.19
This is a major strength if your client won the initial hearing, but can be a
major problem otherwise. If your client
is the one appealing to the Commission, requesting a new hearing is generally the strongest tactic. Alternatively,
you can argue that the referee ruled
contrary to the evidence presented.
Considering the low “preponderance
of credible evidence” standard, a full
reversal on this basis is unlikely.
The Commission is the ultimate
administrative authority when it comes
to Kentucky unemployment benefits.
However, that doesn’t mean the battle
is necessarily over once the Commission rules. In most cases, judicial review
is available in the Circuit Court where
the claimant was last employed.20 Judicial review of a Commission decision
is greatly accelerated compared to a
usual state civil suit. A complaint must
be filed within twenty days, to which
an answer is due within twenty days.21
Judicial review of a Commission
ruling “is governed by the general rule
applicable to administrative actions,”
which means that “[i]f there is substantial evidence in the record to support
an agency’s findings, the findings will
be upheld, even though there may be
conflicting evidence in the record.”22
The judgment of the Circuit Court can
be further appealed to the Kentucky
Court of Appeals.23
Like the Commission before it,
judicial review is generally restricted
to the record established by the referee.
This is why the initial appeal hearing
is critical. Effectively screening your
client, fully preparing for the hearing
(including prepping witnesses if relevant and available), and conducting
the hearing as seriously as one would
a trial is often a recipe for ultimate success. Effective counsel can preserve a
favorable ruling under the deferential
40 The Advocate
appellate standard of administrative
law. Even if the initial hearing results in
a loss, knowing the law and presenting
a strong claim can help overturn an
erroneous referee ruling.
Kentucky workers filed an average
of 164,000 claims for unemployment
benefits in each year from 2011 to
2013.24 During that same time period,
an average of 47,000 were denied those
benefits, many due to employer protests.25 Thousands of those denials are
reversed each year through the appeals
process. Though that process is confusing and intimidating, a knowledgeable
advocate can help a claimant overcome
the low rate of reversal and secure the
unemployment benefits they deserve.
— Joe Dunman practices civil rights and
employment law with Clay Daniel Walton
& Adams, PLC in Louisville, Ky. He may
be reached at (502) 561-2005 or joe@
justiceky.com.
______________
1 KRS 341.370(3), 787 KAR 1:070.
2 Commonwealth of Kentucky Unemployment Insurance Trust Fund Annual
Report CY2013, pg. 11.
3 Ibid.
4 Commonwealth of Kentucky Unemployment Insurance Trust Fund Annual
Report CY2012, pg. 11. The rate of
employer protests was down in 2013
compared to 2012, during which employers protested 50 percent of all new
claims.
5 KRS 341.370(1)(b).
6 Masonic Homes v. Unemployment Insurance Commission, 382 S.W.3d 884,
886-887 (Ky. Ct. App. 2012), quoting
Burch v. Taylor Drug Store, 965 S.W.2d
830, 835 (Ky. Ct. App. 1998). See also,
Shamrock Coal Co. v.Taylor, 697 S.W.2d
952, 954-55 (1985)).
7 KRS 341.370(6). However, “a willful or
wanton, or bad faith, finding is not an
additional requirement when the employee is discharged for conduct specifically identified in KRS 341.370(6).” Ky.
Unemployment Insurance Commission v.
Cecil, 381 S.W.3d 238, 247 (Ky. 2012).
8 KRS 341.420(2).
9 Burch, 965 S.W.2d at 835.
10 Brown Hotel v. Edwards, 365 S.W.2d 299,
301 (Ky. 1962).
11For example, emphasize your client’s
clean disciplinary record and use questions to reaffirm that she understands
the purpose of workplace rules and that
she worked to promote the employer’s
interests.
12 Miller v. Unemployment Insurance Commission, 425 S.W.3d 92, 97 (Ky. Ct. App.
2013), KRS 341.420(4).
13 Screening clients is just as important in
unemployment benefits appeals as in
any other area of the law. Avoid clients
whose stories are inconsistent or whose
explanations for their termination are
suspect.
14Commonwealth of Kentucky Unemployment Insurance Trust Fund Annual
Report CY2013, pg. 11. Of 20,851 total
reported appeal decisions, claimants
won 5,175 of 17,418 claimant appeals,
while employers won 1,058 of 3,433
employer appeals.
15Commonwealth of Kentucky Unemployment Insurance Trust Fund Annual
Report CY2012, pg. 11.
16 KRS 341.420(4).
17 KRS 341.430(1).
18 Ibid.
19 Ibid.
20 KRS 341.450(1).
21 KRS 341.450(1) and (2). Note that the
claimant, employer, and the Commission must each be named as parties.
22 Cecil, 381 S.W.3d at 245-46, citing
Kentucky Commission on Human Rights v.
Fraser, 625 S.W.2d 852, 856 (Ky. 1981).
Further, “[a]n agency’s findings are
clearly erroneous if arbitrary or unsupported by substantial evidence in the
record. If the reviewing court concludes
the rule of law was correctly applied to
facts supported by substantial evidence,
the final order of the agency must be
affirmed.” Id., internal citations omitted.
23 KRS 341.450(4).
24Commonwealth of Kentucky Unemployment Insurance Trust Fund Annual
Report CY2013, pg. 11; Commonwealth of Kentucky Unemployment
Insurance Trust Fund Annual Report
CY2012, pg. 11; Commonwealth of
Kentucky Unemployment Insurance
Trust Fund Annual Report CY2011,
pg. 10.
25 Ibid.
FOCUS
ON YOUR
CASE
A jury from the local community where your case
will be tried are recruited for you.
The jurors discuss your case, react to your witnesses,
consider fault and critique your arguments.
There is no better way to prepare to present to a jury.
You have your choice of holding your focus group or
mock-jury at KJA Headquarters (at Interstate I-64 and
Hurstbourne Lane), or in the Kentucky community of your
choice. (Prices vary for off-site focus groups.)
Gain a better understanding of community
sentiment and juror perceptions.
The strengths and weaknesses you perceive may be very
different from those that jurors discover. Many attorneys
who have used the Focus Group Service are amazed to
learn that jurors’ perspectives often do not coincide with
their own.
KJA will do the leg work for you!
We advertise, recruit, screen, hire and confirm mock-jurors
who spend the day (or half-day) working on your case.
Here’s what is provided for your focus group:
• A large conference room and smaller break-out rooms
at KJA headquarters.
• Continental breakfast and a box lunch for you, the
jurors, and any attorneys or witnesses who accompany
you are provided for full-day trials.
• A video of your presentation and the jury as they
deliberate. Cameras allow you to observe these deliberations without interfering.
• A staff member to assist you in any way needed.
• At KJA Headquarters, you have access to a television,
telephone, fax and copy machines, for no additional
charge.
Low Cost for the Service.
Prices are for groups held at KJA headquarters.
Jury Consultants Now
Available for Focus Groups
Professional jury consultants, Trial in
Focus, will give a deep discount to
the first three focus groups booked
at KJA. For those first three, the cost
is $1500 for a half day and $2500 for
a full day in addition to the regular
focus group fee.
Members
FULL DAY
6 jurors
12 jurors
HALF-DAY
6 jurors
12 jurors
Mon-Fri
$1,500
$2,150
Mon-Fri
$1,050
$1,475
Saturday
$1,800
$2,450
Saturday
$1,250
$1,675
Evening
Evening
$1,250
$1,675
Prices below are for groups NOT held at KJA headquarters.
FULL DAY
6 jurors
12 jurors
HALF-DAY
6 jurors
12 jurors
Mon-Fri
$1,800*
$2,750*
Saturday
$2,100*
$3,050*
Evening
$1,280*
$1,700*
$1,480*
$1,980*
1,480
1,980
*Plus expenses, including staff mileage, meals, and
hotel accommodations when necessary.
Please allow four weeks for jury selection and preparation.
Cancellations made less than 21 days prior to the date of the focus
group will be charged $250 plus any additional expenses incurred.
For more information, or to arrange a focus group,
call Amy Preher at (502) 339-8890 or e-mail APreher@
KentuckyJusticeAssociation.org.
“Our litigation team recently teamed with KJA to focus
group a current case, and it was incredibly beneficial.
KJA has the resources and infrastructure to make the
process seamless. The panel was diverse and informative. Throughout the process, our eyes were continually opened to strengths and weaknesses of our case
we had failed to even consider. Our team left full of
new ideas and insight. KJA’s focus group offerings are
a cost-effective, excellent tool our firm will continue
to use in the future in building our clients’ cases for
trial!”—Sam Aguiar Injury Lawyers
March/April 2015
41
League of Justice
These generous members give more than is required to help KJA pursue its goals of protecting the health and safety of Kentucky’s families by fighting to keep Kentucky juries strong
and Kentucky’s courts accessible to all.
ADVOCATE’S CLUB
(Yearly contribution: $6,000)
No charge for CLE seminars
and material. No charge for
dinner meetings.
Lisa Circeo, Lexington
Richard Circeo, Lexington
Martha Curley, Louisville
Larry B. Franklin, Louisville
Stephen Garcia, Louisville
Michael Hance, Louisville
Richard Hay, Somerset
Gary C. Johnson, Pikeville
Paul Kelley, Louisville
Richard D. Lawrence, Covington
Matthew Minner, Lexington
Gregg Y. Neal, Shelbyville
Peter Perlman, Lexington
Kenneth L. Sales, Louisville
Joseph D. Satterley, Louisville
Joe Savage, Lexington
KJA FELLOWS
(Deferred Giving Life Insurance
Program, Minimum Pledge
$25,000)
Gregg Y. Neal, Shelbyville
HONORARY LIFETIME
KJA MEMBERS
James B. Lenihan, Louisville
Alan N. Leibson, Louisville
42 The Advocate
PRESIDENT’S CLUB
(Yearly contribution:
$3,600-$6,000)
No charge for CLE seminars
and materia. No charge for
dinner meetings.
David Abney, Frankfort
David Barber, Louisville
Andre’ Busald, Florence
Vanessa Cantley, Louisville
Paul Casi, Louisville
A.V. Conway, Hartford
F. Thomas Conway, Louisville
Steven D. Downey,
Bowling Green
William Garmer, Lexington
Mark K. Gray, Louisville
Philip Grossman, Louisville
Sheila Hiestand, Louisville
Eric Jacobi, Louisville
Ron Johnson, Fort Wright
Ray Jones, Pikeville
William Kathman, Florence
Jerry Miniard, Florence
Charles E. Moore, Owensboro
Douglas H. Morris, Louisville
Ted Mussler, Louisville
Stephen M. O’Brien, III,
Lexington
Ann Oldfather, Louisville
Richard Rawdon, Jr.,
Georgetown
Jerry P. Rhoads, Madisonville
Robert E. Sanders, Covington
Gary Schaaf, Paducah
Paul Schachter, Covington
Liz Shepherd, Louisville
Dave Scott, Louisville
Tyler Thompson, Louisville
BARRISTER’S CLUB
(Total yearly contribution:
$2,400 - $3,600)
Half price on all CLE seminars.
Free dinner meetings. Half price
seminar material.
Sam Aguiar, Louisville
Thomas E. Carroll, Monticello
Lee Lawrence Coleman,
Bowling Green
Daniel Dotson, Whitesburg
Mark Edwards, Paducah
Michael Eubanks, Richmond
James T. Gilbert, Richmond
David Gray, Louisville
Mike Hawkins, Frankfort
Penny Unkraut Hendy,
Fort Wright
Neal Herrington, Louisville
Larry Hicks, Crestview Hills
William Kenealy, Louisville
Jennifer Lawrence, Covington
Jennifer Moore, Louisville
Ronald R. Parry, Covington
Fred Peters, Lexington
Hans Poppe, Louisville
Jay Prather, Lexington
Erwin Sherman, Louisville
John Spainhour, Shepherdsville
Jay Vaughn, Newport
THANK YOU
to all who give to the
Kentucky Justice Association.
League of Justice
CONTRIBUTING CLUB
(Yearly contribution: $1,200 - $2,400)
Free dinner meetings. Half price on seminar materials.
Garry Adams, Louisville
Kevin Adams, Louisville
Jeff Adamson, Louisville
Bruce Anderson, Louisville
John Bahe, Louisville
Gregory A. Belzley, Louisville
Deedra Benthall, Danville
Bruce Bentley, London
James M. Bolus, Louisville
Richard M. Breen, Louisville
David Broderick, Bowling Green
David Bryant, Louisville
Gregory J. Bubalo, Louisville
Dean C. Capello, Lexington
Brian Cook, Louisville
Grover Cox, Louisville
J. Fox Demoisey, Louisville
Edward E. Dove, Lexington
Neil Duncliffe, Georgetown
Chris Evensen, Louisville
David Ewing, Louisville
Kelly Fowler, Owensboro
Seth Gladstein, Louisville
Paul Gold, Louisville
Chris Goode, Lexington
Rhonda Hatfield-Jeffers, Somerset
Pat Hauser, Barbourville
Tom Herren, Lexington
Travis Holtrey, Owensboro
Andrew Horne, Louisville
Craig Housman, Paducah
Marshall Hughes, Bowling Green
Thomas Hughes, Louisville
Marshall F. Kaufman, III, Louisville
Mark Knight, Somerset
Tim Lange, Louisville
Justin Lawrence, Florence
Kurt W. Maier, Bowling Green
Lauren Marley,
Bowling Green
Joseph Mattingly, Lebanon
Rob Mattingly, Louisville
Tim McCarthy, Louisville
Matt McGill, Bowling Green
William F. McMurry, Louisville
Albert B. McQueen, Jr., Lexington
Bill Meader, Hyden
M. Austin Mehr, Lexington
Edward S. Monohan, Florence
Brucie Moore, Morganfield
Doug Myers, Hopkinsville
William Nefzger, Louisville
Robert Poole, Crescent Springs
Kevin Renfro, Louisville
Chris Rhoads, Owensboro
Jeff Roberts, Murray
Jon Roby, Bowling Green
Jeff Sampson, Louisville
Delana Sanders, Covington
Justin Sanders, Covington
Michael Schafer, Louisville
Keith Sparks, Bardstown
Chandrika Srinivasan, Louisville
Cara Stigger, Louisville
C. William Swinford, Jr.,
Lexington
Tad Thomas, Louisville
Ed Tranter, Ft. Thomas
Karl Truman, New Albany, Ind.
Nick Vaughn, Somerset
Kevin Weis, Louisville
J. Andrew White, Louisville
Matthew White, Louisville
Will Wilhoit, Grayson
Damon Willis, Louisville
Robert Young, Bowling Green
FRIEND’S CLUB
(Total yearly contribution:
$480 - $1,200)
Chuck C. Adams, Jr., Lexington
Nick Baker, Louisville
Rick Bension, Louisville
Kevin C. Burke, Louisville
Ethan Busald, Florence
Samuel B. Carl, Louisville
Michael T. Cooper, Louisville
Tamara Todd Cotton, Louisville
Kirsten Daniel, Louisville
Andrew Downey, Louisville
Cory Erdmann, Richmond
Hal Friedman, Louisville
Curt Hamilton, Henderson
Brad Harris, Lexington
Stacy Ivey, Lexington
D. Randall Jewell, Barbourville
Martin Kinney, Louisville
Sarah Lynch, Ft. Wright
Matt Nakajima, Covington
Aaron Price, Louisville
Joe Saladino, Paducah
Jared Smith, Louisville
Ty Smith, Louisville
JOHN TACKETT, LEXINGTON
James Vaught, Lexington
Maya Warrier, Louisville
Nathan Williams, Louisville
Names in blue caps
denote a new
club member.
March/April 2015
43
KENTUCKY JUSTICE ASSOCIATION
10602 Timberwood Circle, Suite 8
Louisville, KY 40223
PERIODICAL
POSTAGE
PAID AT
LOUISVILLE, KY
®
PROUD TO BE PLATINUM SPONSORS
KENTUCKY JUSTICE ASSOCIATION
GAYLE CHRISTEN
FLORENCE
877-541-9388
[email protected]
BRAD CECIL
CINDY CHANLEY
LOUISVILLE
877-288-0741
[email protected]
www.RinglerAssociates.com