Nice write up online for the Willamette Week here about how liability insurance rates for Oregon physicians fell. The study from the State of Oregon Department of Consumer and Business Services dispels a major political myth.

While it’s hard to remember, Oregon voters rejected a cap on damages in medical malpractice cases several years ago. The initiative, Measure 35, was sold as necessary due to a crisis. Check out the linked power ponit to see how badly proponents of Measure 35 overstated their position.

Oregon voters saw through the rhetoric and chose the wise course. Today’s study simply confirms the wisdom of that choice.

It should be interesting to see whether this objective information stifles the recurring urge by some to put limits on damages. The absence of any crisis makes it pretty difficult to argue for caps on damages.

David Sugerman

I recently turned down a complex but interesting case that had been handled by a much larger firm. In hearing about the case, I asked the potential client how he had decided to have this firm handle his case. He explained that he felt like he needed a big firm to take on his former employer’s big firm. According to this young man, who was actually fairly sophisticated, a solo or small firm would simply be out-gunned by the large firm resources.

He was wrong, of course, and part of my reason for turning down the case was that the larger firm had made some poor choices in how they pursued the matter.  His perception is not uncommon.  What few but the best-informed consumers realize is that in the law biz, bigger is not necessarily better. And usually it is far more expensive.

Take this example in which Century Indemnity Insurance Co. is reportedly involved in a fee dispute with the large law firm of Latham & Watkins.  According to the linked report, Latham & Watkins billed an associate who had not even passed the bar at the rate of $450 per hour.

The thing about new lawyers is that when they come out of law school, they really don’t know how to practice law. They may be the best and the brightest by virtue of their acadmic achievements. But at most, they’ve simply studied cases, constitutions, and laws. They haven’t learned how to apply the skills.

When you’re paying by the hour this matters. A seasoned attorney can accomplish in a tenth of a time what a new attorney can, and the seasoned attorney will generally turn out better quality work to boot. That difference is supposed to be reflected in hourly rates. In other words, a new attorney’s rate should be much lower than a seasoned attorney’s rate.

Put another way, who in their right mind would pay $450 per hour for work by someone who will take 10 times as long to do the same task and likely won’t do as good a job?

Those who are truly in the know realize that small firms often deliver the best value. A well-trained and experienced practitioner in a small firm often has profound advantages over large-firm colleagues. The small firm practitioner typically has lower overhead and thus doesn’t bill frivolously. We deal directly with our clients and have to work harder to maintain relationships. Small firms tend to be nimble. We don’t answer to committees, and waste clients’ time and money with lengthy memos, team meetings, and the like. Instead, we get the work done.

Part of me is wickedly amused that Century Indemnity paid through the nose. In representing injured people, I have developed a sense of disdain for many large firms and their inflated billing practices. But of course, that’s between the firm and its client, and none of my business. Should be interesting to see whether this dispute shines a light on inflated hourly rates and overpaying for legal help.

David Sugerman

Tough times lead consumers to cutting out the luxuries. Tougher times mean that we all start looking at cutting necessities in order to get by. I imagine that some consumers will look at lowering insurance costs by going bare or reducing auto coverage. Here are some things that Oregon consumers need to know about cutting auto coverage.

1. It’s a Class B offense to drive uninsured: Pretty simple. The act of driving without insurance is a traffic offense. ORS 806.010.

2. If you’re in a traffic accident and you’re uninsured, you’re subject to drivers license suspension for a year.

3. In a heaping-it-on-the-poor move, the Oregon Legislature made it clear that if you’re uninsured and you’re in an auto accident, you can’t recover non-ecomic damages. That’s true regardless of whether you were at fault.  ORS 31.715

4. Excess coverage is usually much cheaper than the first level of insurance. So your insurance dollars actually go a long way when you are buying coverage over the minimum.

In tough times, it can be hard to make the best decisions. Driving uninsured is really unwise. One way to think about it is that insurance–like gas, car payments, and maintenance–are part of the true cost of driving.  So if you’re looking at cost cutting, unless you’re getting rid of the car, don’t cut the insurance.

David Sugerman

The State of Oregon Department of Consumer and Business Services reportedly fined Bankers Life and Casualty Co. $150,000 over its sale of unsuitable annuities to seniors. Bankers’ Life reportedly refunded premiums to approximately 20 Oregon seniors who were paying so much on annuity contracts that they could not afford to cover living expenses.

Interesting legal question as to whether Bankers’ Life sharp practices qualify as elder financial abuse under ORS 124.110. That statute is designed to protect seniors from financial abuse. It’s a powerful law that provides a means of checking physical or financial abuse of Oregon seniors.

I don’t have any knowledge of the State’s actions, other than the media reports. It’s good that the State took action. My hope is that the affected seniors got fairly compensated for all of their harms and losses. I have to wonder whether there are other victims out there, as it’s hard to imagine that Bankers’ Life only sold 20 of these types of policies to vulnerable Oregon seniors.

David Sugerman

News today is that the Oregon Supreme Court issued this opinion that could help Oregon consumers with property damage insurance claims.  I have to confess that insurance policy cases make for dry reading.  So it can be hard to follow these types of cases.

Here’s what the Court decided.

When you are in a wreck, the company that insures your car must restore the car to its pre-collision condition.  If it cannot, the insurance company must pay the consumer the diminished value of the vehicle.  It’s a nice result for consumers. Consumers get nickled and dimed to the poorhouse, and this is simply one modest change that helps consumers get the benefit of the insurance that they buy.

This really becomes more of an issue when you’re injured in a car crash. It’s bad enough that you have to deal with the physical injury, the pain, and the long process of getting back to health.  But when–on top of that–you’re being nickled and dimed by your insurance carrier, it just seems like there’s something wrong. After all, when we pay for insurance, we should get full coverage. The Court ruled the right way today, and that’s a good thing.

It will be interesting to see whether the Oregon insurance industry lobbies for a re-write of this rule when the Oregon legislature reconvenes in a few months. Wouldn’t suprise me a whit. But then I take a fairly jaundiced view of these things.

David Sugerman

No secret that I’ve been a big critic of large insurance companies. You don’t have to look too far into the archives to find a combination of snarkiness, outrage, and jaundice over some of their practices. So this one is in the spirit of calling it fairly. While away on vacation, I missed this report on the outcome of high-flying plaintiffs’ lawyer Dickie Scruggs’ fall from grace.

Back story is that Scruggs is one of the guys who took on the tobacco industry made millions, took on the insurers on Katrina claims, and was poised to make millions more. In between he’s done all manner of injury cases. I have no basis to know the specifics, but I would be willing to bet that he’s earned sums that might shame some small countries’ gross domestic profit numbers. So he falls from grace when the state and maybe a few insurance carriers go after him for attempting to bribe a judge.  They got him, and now he’s going to jail.

Let’s be clear. Allstate, State Farm, The Wall Street Journal and everyone else has a right to call this guy a crook and to be wary of conduct like this. I join them, by the way. I particularly appreciate what Mr. Scruggs has done for injured people with legitimate claims and their lawyers who play by the rules. (Editors note: He’s being snarky, again…he’s not grateful. Not one bit.)

It’s a black mark on those who represent injured people. It’s worse than the magic pants guy, as this was an attempt to completely undermine the fairness of the civil justice system. The problem is that criminals and clowns like this provide major fuel for the efforts of those who would limit consumers’ ability to access the courts.

It was reported that Mr. Scruggs swooned when the judge sentenced him to the maximum. Good. And I hope the jerk spends each hour of his five years reflecting on how his corruption undermined the civil justice system. I say big props and major thanks to the trial judge. By slamming him, the judge made it clear that the integrity of the civil justice system will not be undermined by criminals.

David Sugerman

There’s that commercial with the earnest, wise and sentorian guy talking about all the great things they do, ending with the intonation, “That’s Allstate’s stand.”  A new American Association of Justice study noted here names Allstate the worst insurer.

Interestingly, Allstate’s CEO’s 2007 compensation topped $10 million for the year.  That’s a lot of premium money. More to the point, it’s fair to say that Allstate has some…uh…history of being naughty.

My own experience is that some insurers are worse than others. While not all are bad news, many give injured consumers and policyholders the runaround when people make claims for their harms and losses. It’s common to hear someone in my office express surprise when Allstate or one of the other carriers fails to make good on its end of the insurance contract by, for example, failing to pay medical expenses incurred by the injured policyholder.

That’s particularly outrageous because the policyholder did what they were supposed to when they paid for the coverage. And then they get stiffed or hard-timed by Allstate. This is what we in the trenches refer to as, “Allstate’s stand.”

David Sugerman

Here’s some good news in what is something of a sleeper. Measure 51, a one-sided and unnecessary ballot measure that would limit consumers rights failed to qualify for the November ballot.  The measure would have limited attorney fees to 10 percent in most contingent fee cases.

Contingent fees are those paid as a percentage of what a lawyer recovers for an injured person.  They are an equalizer. While the wealthy and big businesses can afford to pay lawyers by the hour, the rest of us don’t have the means to do so. The contingent fee system levels the playing field, allowing middle income Oregonians and small businesses the ability to hire skilled lawyers who will work for a percentage of what they obtain for the client.

The measure limited only contingent fees; it didn’t limit what those who afford to pay by the hour could pay. Had it passed, the measure would have limited consumers’ access to the best legal talent by artificially limiting fees.

My son–a somewhat sardonic 18 year old–saw through it immediately. “Wouldn’t limiting fees actually encourage lawyers to file more frivolous lawsuits?” (He’s  smarter than his dad; I never thought of that…thanks kiddo, you’re doing the old gray fart proud.)

Here’s the thing. At bottom the one-sided measure would favor insurance companies, HMOs, and manufacturers of dangerous products. They don’t want consumers to have access to the courts. They know that the best way to close the courthouse doors is to make sure that injured consumers can’t afford to hire lawyers. This, by the way, is part of the Bush/Cheney/Rove agenda. And as with many other things they failed.

Thankfully, Oregon consumers knew better. We’ve come to realize that the initiative process is one that is used by special interests to advance a radical agenda. It’s getting harder to qualify measures, and Oregonians are getting more skeptical about the unintended consequences of poorly drafted initiatives.

That’s great news.

David Sugerman

It sounds like a set up in search of a punch line: What’s the difference between an Oregon lawyer and a Texas lawyer? If you’re an Oregon consumer, you can have a laugh, and if you live in Texas, well, shed another tear.

Oregon requires that each Oregon lawyer carry liability insurance, as a way to protect consumers in case the Oregon lawyer mishandles the client’s matter.  The Professional Liability Fund provides the first level of insurance to all Oregon lawyers. And that’s part of the secret to its success. There’s a lot of purchasing power when you have a large group buying insurance. As a result, the annual premiums are affordable.

Texas takes a different approach. A commission set up by the Texas Supreme Court recently rejected a rule that would require all Texas lawyers to inform clients about whether they have liability insurance.  The proposed rule was fairly straightforward. It simply required all Texas lawyers to disclose whether they had malpractice insurance. The commission rejected the rule. I guess it’s there own special version of, “Don’t ask; don’t tell.”

According to the news report, the commission rejected the rule because…gasp!…it could lead to mandatory insurance.  Oregon lawyers and consumers have got to be ridiculing Texas over this one. Lord knows that mandatory liability insurance could lead to actual protection of the public interest.

This one is a no brainer.  As an ex-Texan, I can say with the certainty of one who was born and raised there, no one ever accused the mighty Lonestar State of being long on brains. (And of course, I feel compelled to explain that it was a long time ago, I had no say in the matter, and…and…and….)

Having insurance is actually one of those comforts for both me and my clients. I’ve handled multiple lawyer malpractice cases over the years, and I’ve learned that lawyers sometimes make mistakes that can do great damage to our clients.

So why would anyone go without?  The Texas commission really missed the boat on this one.  Mandatory insurance has protects the public in Oregon.  And even if Texas won’t insist on insurance, the Texas commission chose to sow more seeds of distrust by blowing past the chance to provide Texas consumers with a small bit of protection. Bad call.

David Sugerman

It may have been inevitable. Late last week, the Oregon Supreme Court released its opinion in Goddard v. Farmers Insurance. Oregon court watchers have been waiting for this opinion. It addressed whether under federal due process restrictions, a punitive damage award against Farmers Insurance was too high.

It’s a long opinion. Here’s the link: www.publications.ojd.state.or.us/S053405.htm

It’s a complicated case that spans more than 20 years. My friend and colleague, Bill Barton, represented the estate in this case that featured more twists and turns than any in recent memory. The short version is that a drunk driver, Mr. Munson, killed Marc Goddard back in 1987. Farmers insured the drunken Mr. Munson. When the Goddard family sued, Farmers had the opportunity to pay its policy to protect Mr. Munson, but refused to do so.

The underlying automobile case went to trial, and the jury awarded substantially more than the $100,000 policy limits that were in place to protect Mr. Munson. That was bad.
That failure exposed Mr. Munson to profound problems because the Goddard family could collect more the excess from Mr. Munson. Farmers’ refusal to settle created a bad faith claim. The Goddard estate pursued that claim on assignment, standing in Mr. Munson’s shoes against Farmers. And that bad faith claim resulted in a multi-million dollar punitive damage award. Ain’t that a mouthful?

Anyway, all sorts of bad stuff came out in the trial against Farmers about how they had multiple opportunities to protect their insured, Mr. Munson, by paying the policy limits, and they refused. The jury socked it to Farmers. Farmers appealed claiming that the multi-million dollar punitive damage award violated Farmers’ federal constitutional due process rights.

With the remaking of U.S. Supreme Court, the due process rights of corporate interests have ascended to a position of prominence. The linchpin of the corporate due process analysis rests upon the bizarre notion that when a corporation engages in wrongdoing, it is entitled to know how much financial exposure its misconduct creates. It has become one of those axioms repeated so often by the U.S. Supreme Court and conservative commentators that no one stops to examine how the emperor has no clothes.

Because it’s problematic, to be kind. What the U.S. Supreme Court has decreed is that every corporation should be able to perform a cost-benefit analysis on misconduct. For those old enough to remember, this sounds vaguely familiar, doesn’t it? As in the Ford Pinto–one of the landmark cases of U.S. product safety litigation. In that case, Ford executives chose to not recall the exploding Pinto to modify its dangerous gas tank because–they reasoned–they would lose more money by the recall and retrofit campaign than they would if they had to defend an expected number of death claims from fiery explosions.

Bad conduct by any measure. And the jury that heard that evidence used a multi million dollar punitive damage award to teach the people at Ford that they can’t choose profit over safety.

As the Court in Goddard pointed out, they were applying federal constitutional law as they distilled it from U.S. Supreme Court opinions. So I suppose it’s important to clarify that the problems emanate from the D.C. Supremes, as opposed to Salem. Cold comfort, unfortunately.

And with all that lengthy background (sorry!), it’s now easy to explain how this hurts consumers. The bright-line punitive damage limit gives every corporate wrongdoer the ability to do math to figure out whether or not they will be penalized for misconduct. This is not exactly the best way to make sure that corporations act fairly. Instead, it encourages misconduct with limits.

The only saving grace of Goddard is that the Oregon court reserved an exception for extreme misconduct, which can still lead to higher punitive damages. They had to say that, actually, as they recently decided Williams v. Philip Morris, affirming a substantial punitive damage award for the tobacco giant’s outrageous misconduct. Still, it’s easy to see the future here. Short of profound fraud that causes death, a corporation’s misconduct will expose it to punitive damages of no more than four times the amount of actual damages awarded to an injured person.

So corporate wrongdoers, “Come on down!” Just crank out the numbers, and you’ll always know how bad you can be.

David F. Sugerman