'We all have to eat'

'We all have to eat'

The legal community and insurance industry await a decision by the Florida Supreme Court on a challenge to insurance tort reforms enacted in 1986.

By David R. Corder

Associate Editor

The justices' first question came quickly, within 30 seconds. Tampa appellate attorney Chuck Schropp realized it wouldn't be a typical hearing on the floor of the Florida Supreme Court. Then the inquiries cascaded.

It was apparent from the justices' questions at oral arguments earlier this month that they had taken keen interest in Goble v. Frohman (SC03-1245), an appeal of a Hillsborough County personal injury lawsuit that could impact the cost of liability insurance in Florida. A ruling for the plaintiff could induce some insurers to cease liability insurance policy-writing activities in the state. And it could make health insurers liable for multi-millions of dollars in discounted fees. That, in turn, could motivate the Florida Legislature to amend the Tort Reform and Insurance Act of 1986 to offset the ruling's impact.

Interest in the appeal, filed in April 2002, ran high from the onset. The appeal of the circuit court decision to the 2nd District Court of Appeal quickly raised objections from the Florida Defense Lawyers Association. On the other side, the Florida Academy of Trial Lawyers joined on behalf of the plaintiffs.

Although the 2nd DCA affirmed the circuit court action, it certified Goble v. Frohman as a question of great importance and referred it to the high court. The question centers on Albert Goble's claim to a discount that his health insurance company, Aetna U.S. Healthcare, received from the hospital and physicians who treated him. The defendant, Mark E. Frohman, was only required to pay the discounted medical bill, not the entire amount. Goble claimed he was entitled to the full amount.

The issue elicited skepticism from Justice Charles T. Wells, who is considered one of the more conservative members on this predominantly liberal panel.

"Doesn't that turn this whole process into a sham?" Wells asked Schropp at oral arguments. "Here we have a situation in which we're talking not about punitive damages; we're talking about compensatory damages.

"Here we know as a matter of actual fact that there wasn't a loss," he added. "And so, if there is not a loss, how can there be a compensatory payment to cover that amount?"

Clever lawyering

Following a motorcycle-car accident, Goble accrued about $574,554 in what plaintiff and defense attorneys acknowledged as reasonable and customary medical expenses. However, Aetna, a health maintenance organization, paid the medical providers about $145,971 under a standard pre-existing managed-care contract. Neither the insurer nor the medical providers disputed the settlement.

But Goble claimed that because he fulfilled his contractual obligations, he had a right to the difference - about $428,584. To plead his cause, he retained Timothy Prugh and Theodore Karatinos of Tampa's Prugh Holliday Deem & Karatinos PL.

In early 2002, a 13th Circuit jury ruled for Goble and awarded him the full amount. On motion, however, former GrayRobinson PA attorney Keith Carter, now at Morgan Colling & Gilbert, argued for a setoff of the difference between the amount Aetna paid the medical providers and the costs considered reasonable and customary.

Carter opposed the verdict, saying it violated the collateral sources indemnity rule under Section 786.76 of the Florida Statutes - a remedial cure enacted in 1986 as part of an effort to stem a perceived crisis in the liability insurance industry. That statute took precedent over all common law applications involving insurance liability and collateral source payments.

Circuit Judge Perry Little granted Carter's motion and reduced the award to $167,983. That amount included $145,971 in negotiated managed care costs, a $15,000 co-pay deductible and about $7,013 in insurance premiums paid by Goble after the accident.

"It was some clever lawyering," GrayRobinson appellate attorney Dan Mitchell, who handled the defendant's appeal, says in an interview. "(Carter) deposed all of these providers and the insurers and established the amount of the write-offs and the amount of the premiums paid by the plaintiff and had that presented to the trial court."

Dissatisfied with the reduced award, Goble retained Schropp, Amy Farrior and Tom Elligett of Tampa's Schropp Buell & Elligett PA to appeal. These appellate practitioners, too, came up with a clever strategy. They argued that state law defines collateral sources only as payments made to or on behalf of the claimant but does not specifically refer to write-offs or discounts in the definition.

"The plain meaning of the 'collateral sources' definition cannot encompass the amounts the plaintiff's health care providers discounted from their medical bills," the plaintiff's legal team argued in its Supreme Court brief.

The Schropp-Farrior-Elligett team offered two reasons for their argument.

"First, these discounts or write-offs are not 'payments made,' " the brief states. "At most, they are payments that are not required to be made. Second, the plain language of the statutory definition requires that 'collateral sources' must be payments made to the health care provider, not by the health care provider. Because plaintiff's health care providers are the ones who provided the discounts or write-offs, those discounts or write-offs do not meet the statutory definition."

Ask Mr. Webster

In response, Mitchell took a simple tact. Since the Legislature didn't clearly define the word "payment" in Section 786.76, he referred the justices to "Webster's Third New International Directory" and "Black's Law Dictionary."

"Plaintiff's apparent quarrel with the Second District's holding centers around his view that a 'payment' may encompass only a transfer of cash," Mitchell argued in his Supreme Court brief. "This interpretation ignores the language of Section 786.76(2)(a)(3), which includes as collateral sources contracts or agreements to 'provide, pay for or reimburse the costs of hospital, medical, dental or other health care services (emphasis added).

"If a 'payment' meant only a cash transfer, then why did the Legislature use all of this excess verbiage?" Mitchell asked. "Why didn't it just say 'pay for' and leave it at that?"

The plaintiff's legal team offered another argument for why it thought Goble was entitled to the difference between the discounted bills and the amount considered reasonable and customary. They say Goble as an HMO subscriber created the discounts by forfeiting his right and freedom to choose a medical provider.

"Plaintiff contributed more than his premium payments and co-payments," the plaintiff's brief states. "In order to obtain discounted care through his HMO, he agreed to restrict his freedom to select his own health care providers and potentially his treatment options as well. The Second District's interpretation of the collateral source statute fails to implement express legislative intent by failing to compensate the plaintiff for his significant non-monetary contribution to securing the discounts or write-offs. Ironically, this creates the windfall the Second District sought to avoid, but for the defendant, not the plaintiff."

As for the windfall, Mitchell suggests an alternative theory.

"The amorphous concept of 'loss of freedom of choice' by participation in an HMO lacks sufficient concreteness to allow for an offset against the collateral source payments," states Mitchell's brief. "Although it is probably widely assumed that HMO premiums are less than premiums for other forms of insurance coverage, plaintiff elected not to adduce evidence of any premium difference before the trial court.

"The argument that allowing plaintiff to recover the $428,533 in adjustments would help him whole by offsetting his contingent attorney fee is simply an attempt to disguise the unquestioned windfall to him as well as to his attorney in sheep's clothing of full compensation," he added. "Further, it is tantamount to awarding him attorneys fees in an action where fees are not recoverable."

When asked about Mitchell's argument, Schropp did not dispute the fact that contingency fees were part of the reason his firm took the case.

"It was a significant injury, so there would be a fee associated with it," he says in an interview. "We all have to eat. You take a case for a bunch of reasons. There are issues here that transcended the particular case."

To bolster his arguments, Mitchell also introduced a corresponding 4th DCA appeal decided after the two sides submitted briefs last fall.

In Thyssenkrupp Elevator Corp. v. Beatrice Lasky (4D03-2838), Mitchell noted the 4th DCA ruled Lasky was not entitled to the discount her medical providers granted to Medicare.

"Payment is not just forking over money," Mitchell told the justices. "It also means the discharge of debt."

Waiting game

The justices began deliberations on April 5, and a decision is not expected soon. Mitchell and Schropp each say it's anyone's guess how the justices will vote.

Several insurance industry representatives declined comment on the issue. A spokesperson for Blue Cross/Blue Shield of Florida, one of the state's largest providers of HMO services, says company officials won't comment.

The Florida Association of Health Plans, which represents the state's managed care industry, did not respond to a GCBR request for comment.

Predictably, each of the appellate attorneys thinks the justices reacted favorably to his arguments.

"This is one that has a lot of emotional concern," Schropp says. "I think some of the justices got it - Justice (Barbara) Pariente specifically. I do think the point was transmitted, and that it was certainly recognized by some of the justices."

Besides Wells, Mitchell says he thinks he convinced Justice Raoul G. Cantero III, whom many label as conservative because of his appointment by Republican Gov. Jeb Bush. He also thinks he convinced Chief Justice Harry Anstead, possibly a critical swing vote.

"My chief antagonist was Pariente, one of the more liberal members of the court," Mitchell says. "Cantero appeared to be very well aligned with our argument. Anstead seemed to be going our way, too. To a large extent, we're looking at a 4-3 split. That's enough to carry the day."

If not, Mitchell says a ruling for the plaintiff could have harsh consequences.

"The justices all know if they were to write an opinion and reverse the district court, this is something the Legislature would take up the very next session," he says. "Ultimately, if there is a victory, it's going to be very short-lived."

If it doesn't, he adds: "(The cost) is going to come from you, me, and everyone down the street. This is big, big. The affect of this is just going to be enormous."