Last week, two federal courts of appeals–the 4th Circuit and D.C. Circuit–considered whether the IRS reasonably interpreted the Affordable Care Act as allowing the IRS to give tax credits to taxpayers that purchase health insurance through an exchange set up by the federal government. Both courts of appeals considered the same statutory text, the same legislative history, the same regulation, and the same arguments. And they applied the same legal principles.

Yet they reached opposite results. In King v. Burwell, the 4th Circuit found the IRS’s interpretation reasonable. In Halwig v. Burwell, the DC Circuit found the IRS’s interpretation unreasonable. How?

Given that the issue was the propriety of an IRS regulation, both courts proceeded under the framework of Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). That analysis requires the court to determine whether the statute states an unambiguous direction on the issue addressed by the regulation. If it does, then the court must determine whether the regulation is consistent with the statutory command. If the statute is ambiguous and leaves room for agency interpretation, courts defer to the agency’s regulation so long as it is reasonable.

Both courts focused on the language of the statutory provisions. The difference between the two courts’ conclusions turned on disagreement over whether 26 U.S.C. section 36B(b)(2), which establishes the amount of premium assistance that is to be provided, unambiguously directs that only taxpayers who purchase coverage through a state-run plan receive premium assistance. More specifically, the courts of appeals disagreed about the impact of surrounding statutory provisions on the proper interpretation of section 36B.

The ACA Provisions at Issue    

Under section 36B(a), an “applicable taxpayer” (defined as a taxpayers whose income is between 100% and 400% of the poverty line) is entitled to a tax credit “equal to the premium assistance credit amount of the taxpayer…” The term “premium assistance credit amount” is defined in section 36B(b)(1) as the sum of monthly “premium assistance amounts,” as defined in section 36B(b)(2).  

The challenge to the IRS’s regulation allowing tax credits for taxpayers purchasing insurance on a federally established exchange was that section 36B(b)(2), in conjunction with section 36B(c)(2), defines the “premium assistance amount” as calculated solely based on premiums for coverage purchased through a state-established exchange. In defining “premium assistance amount,” Section 36B(b)(2) states that       

The premium assistance amount determined under this subsection with respect to any coverage month is the amount equal to the lesser of—

(A) the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer’s spouse, or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through an Exchange established by the State under 1311 [1] of the Patient Protection and Affordable Care Act, or

(B) the excess (if any) of—

(i) the adjusted monthly premium for such month for the applicable second lowest cost silver plan with respect to the taxpayer, over

(ii) an amount equal to 1/12 of the product of the applicable percentage and the taxpayer’s household income for the taxable year.

Section 36B(c)(2), in turn, defines “coverage month” as any month in which “as of the first day of such month the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer is covered by a qualified health plan described in subsection (b)(2)(A) that was enrolled in through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act…” 

According to the plaintiffs, these provisions unambiguously mean that a taxpayer can have no “coverage months” unless he or she is enrolled in a state-established exchange. So the statute does not provide any subsidy amount for taxpayers who are enrolled in exchanges established by the federal government in lieu of a state.

Reading the Provisions in Context

Both courts recognized that these statutory provisions cannot be read in isolation, but rather must be understood in the context of the statute as a whole. So both proceeded to analyze sections 1311 and 1321 of the ACA, which deal with establishing exchanges by the state and federal government.

Section 1311, read literally, requires all states to establish exchanges. It defines “Exchange” as “a governmental agency or nonprofit entity that is established by a State…” But section 1321 says that states may “elect” to set up exchanges, thus making it an option rather than a mandate. And if a state does not elect to itself establish the exchange, section 1321 directs the federal government to “establish and operate such Exchange within the State…” 

The two courts differed on how to understand the command that the federal government set up “such Exchange within the State.” Both agreed that it means that a federally established exchange is the functional equivalent of a state-established exchange and that a federal exchange must be understood as an exchange established under the authority of section 1311. But the courts disagreed about whether that makes it reasonable to understand the phrase “Exchange established by the State under section 1311” as including a federal exchange.

According to the DC Circuit, “section 1321 creates equivalence between state and federal Exchanges in two respects: in terms of what they are and the statutory authority under which they are established.” But it does not change the identity of who is establishing the exchange. The DC Circuit understood Section 36B(b)(2)(a) to have 3 elements: “(1) an Exchange (2) established by the State (3) under section 1311.” And, it explained, the only reasonable way to understand the statute is that a federal exchange is not an exchange “established by the State.” So the statute unambiguously sets the subsidy amount for coverage purchased through a federal exchange at zero. As such, the DC Circuit found the IRS regulation contravened the statute and could not stand.

According to the 4th Circuit, on the other hand, it is at least as reasonable to understand the interplay of sections 1311 and 1321 as requiring the federal government to set up an exchange essentially on behalf of the state when the state does not. So a federal exchange can reasonably be understood to be encompassed within the provisions defining premium assistance amounts. Because such an interpretation was reasonable, even if not the only plausible interpretation, the statutory provisions were ambiguous. And because they were ambiguous, the IRS’s interpretation of the statute was permissible, and the courts required to defer to it.

In short, two federal courts of appeals reached opposite conclusions about the propriety of the IRS’s regulation because they disagreed about whether the statutory provisions, read in context, are ambiguous. And perhaps that should not be surprising, given the complexity of the ACA. Indeed, the concurring and dissenting opinions reflect that there was disagreement even among the judges on each panel about how to interpret the statute.

Update (09-04-14): At the government’s request, the D.C. Circuit has voted to rehear the Halwig case en banc, and vacated the ruling of the panel. Grants of rehearing en banc are rare, but it’s not all that surprising that review by the entire court would be granted in this case, given the magnitude of the case and that the decision conflicted with a decision of another court of appeals. But even if the en banc court reaches the same result as the 4th Circuit, I would still expect the Supreme Court to eventually take up the issue. Although in run-of-the-mill cases, the Supreme Court is more likely to grant certiorari if there is circuit split, the Court can review any case it chooses, so long as there is a federal issue involved. And it has shown a penchant for taking on cases involving high profile, controversial issues of national import, whether there is a circuit split or not.  

Florida’s acupuncture physicians and massage therapists recently learned that they are (again) ineligible to be paid PIP benefits for treating automobile accident victims. Chiropractors learned that PIP coverage of their services has (again) been curtailed as well. But the changes may be temporary. 

They resulted from a loss suffered by acupuncture physicians, massage therapists, and chiropractors in their court battle against implementation of the 2012 PIP Act amendments to Florida’s No-Fault insurance law, a/k/a PIP. Among other things, the 2012 PIP Act excludes acupuncture and massage therapy from PIP, and limits coverage of chiropractic treatment. Those provisions of the 2012 PIP Act had been put on hold due to a preliminary injunction entered by the Leon County Circuit Court.  

The First District Court of Appeal set aside the preliminary injunction in its October 23, 2013 decision in McCarty v. Myers. But in appellate court decisions, as in many areas of life, the devil is often in the details. And the 1st DCA’s reasoning for overturning the injunction left room for acupuncture physicians, massage therapists, and chiropractors (and their patients) to be optimistic that their efforts to prevent the amendments from being implemented may eventually be successful.

Why? Because the decision came down to who was suing, not the merits of the claims. The litigation was brought by a group of practitioners who have banded together and hired attorneys to sue to block the 2012 PIP Act from going into effect.

Named as plaintiffs were three providers: an acupuncture physician, a chiropractic physician, and a massage therapist. Also named as a plaintiff was “Jane Doe,” who apparently is not a real person, but a fictitious person who was supposed to be a representive of “all those citizens of Florida that are, were, or will be injured as a result of a motor vehicle collision that were also required to purchase $10,000 . . . of PIP insurance coverage but may actually only receive no or $2,500 . . . in benefits.” 

Under the doctrine of “standing,” a person or entity can sue only to seek relief for an injury that he/she/it suffered. Conversely, a person lacks standing to bring a legal claim to enforce the rights of others or of the general public.

The provider plaintiffs asserted that the 2012 PIP Act violated several provisions of the Florida Constitution. In entering the injunction, the trial court seized on one of those asserted constitutional violations, finding that there was a significant possibility that the 2012 PIP Act was unconstitutional for denying to persons injured in accidents the constitutional right of access to courts.   

The problem with entering an injunction based on that claim, according to the 1st DCA, was not that the claim itself lacked merit, but that that the plaintiffs did not have standing to bring it. The plaintiffs were providers, not accident victims, so they were not injured by the asserted denial of access to courts. Even if they may have been injured in a different way, i.e., by losing revenue, the providers did not claim that they themselves had been denied access to courts, so they did not have standing to sue on that claim, or to obtain an injunction based on it — at least not “[w]ithout a showing of an actual denial of access to courts in a specific factual context…”

In a footnote, the court cast doubt on whether the providers could sue under a limited exception to general standing rules, in which a third party may have standing to remedy the rights of a person who is unable to pursue his/her own rights. But the court did not address whether the providers could sue as assignees of accident victims, as providers have done in other contexts–it is common for providers to have their patients assign their insurance benefits to the provider–apparently because the plaintiffs did not claim to have standing as assignees. 

The 1st DCA left open several options for the plaintiffs to continue to pursue their efforts to block implementation of the 2012 PIP Act. Chief among them would be to join as additional plaintiffs some injured patients who have had PIP coverage of acupunture, massage therapy, and chiropractic care denied due to the 2012 PIP Act, i.e., plaintiffs that suffered the asserted injury of being denied access to the courts. Barring that, it may be a viable option for the providers to continue as the only plaintiffs, but as assignees of their patients.

Either way, it seems likely that the providers will be able to find a way to overcome the issue of standing, and ultimately to obtain another injunction. Of course, it is possible that 1st DCA would reverse on the merits if a new injunction is entered and appealed. But its October 23, 2013 decision gives no indication that the court views the claims as unmeritorious.   

People make mistakes. Even lawyers. Even judges. We are all human after all, and to be human is to be fallible. In the pressure-packed environment of a trial or hearing, the probability that a mistake will be made is even greater.

Part of the job of an appellate lawyer is to comb through the record of what happened in the trial court, and with the benefit of a fresh perspective, find the errors, and explain to the appellate court what errors the trial judge made. But that is not the end of the story. Not even close. If it was, one would expect every appeal to result in reversal. The reality is otherwise.

Why? There are a host of reasons–ranging from the failure of the side that lost to preserve the issue (by making the argument to the trial judge) to the deference given to the trial judge in making certain decisions that he or she is in a better position to make–and there isn’t nearly enough space here to get into all of them.

The Harmless Error Doctrine

One of the most significant factors–at least when the decision being appealed was reached after a full-blown trial–is the doctrine of harmless error. It has been the subject of recent debate, and the Supreme Court of Florida is poised to set down the definitive word on the issue some time after it resumes its opinion cycle after the summer hiatus.

Harmless error, in a nutshell, is the idea that sometimes a trial judge’s ruling, even though incorrect, was too insignificant in the context of all of the trial evidence the jury saw to have impacted their decision. The doctrine exists because the law recognizes that trials are a tremendous ordeal and after so much effort by the parties, the trial judge, and the jury members, the results should not lightly be tossed aside.

After the two sides and the judge have spent so much time preparing for and conducting the trial, and the members of the jury have sacrificed their time to listen and deliberate and reach a decision, appellate courts are understandably hesitant to undo the result. On the other hand, the law is the law, and litigants have the right and expectation that the law will be applied correctly in their cases, whether or not that may cause inconvenience.

“Harmless error” is where appellate courts draw the line. In Florida, there is actually a statute that prohibits courts from reversing unless “in the opinion of the court to which application is made, after an examination of the entire case it shall appear that the error complained of has resulted in a miscarriage of justice.”

Drawing Lines 

But it is a lot easier to say that an error will not result in reversal when it is harmless than it is to figure out when an error was, in fact, harmless. How does the court know whether there has been “a miscarriage of justice”? Judges do not have the option of calling the jurors and asking them whether their decision would have been different if they had not heard testimony they should not have been allowed to hear, or if they had seen evidence they should have been allowed to see.

So appellate courts have created tests to be used as a substitute. Most recently, the Fourth District Court of Appeal of Florida (4th DCA), sitting en banc, wrestled with what test to use in its late 2011 decision in Special v. Baux, 79 So. 3d 755 (Fla. 4th DCA 2011) (en banc).

The court began by observing that prior decisions of the Supreme Court of Florida and District Courts of Appeal of Florida reflect two ways of looking at whether there was a “miscarriage of justice.”

One approach asks whether the result would have been the same if the error had not been made. That is, looking at all of the evidence, if the jury had seen what it was supposed to see, would it have reached the same decision anyway? If so, the error is harmless. If not, a new trial is required. The 4th DCA called this test a results-oriented approach.

The second approach looked at whether the error had “an adverse effect upon the jury’s verdict.” In other words it asks whether the error “contributed to the verdict.” Was the wrongfully admitted or excluded evidence something that played a part in the jury’s decision? The 4th DCA called this approach an “effect on the fact-finder” test.

Prior 4th DCA decisions had used the results-oriented approach, and every other District Court of Appeal had also adopted some variation of the results-oriented test. Nonetheless, in Special, the 4th DCA declared that approach to be inconsistent with Florida Supreme Court precedent, and that it improperly requires the appellate court to weigh the evidence, which is not the role of an appellate court.

In its place, the Fourth DCA became the first Florida District Court of Appeal to expressly adopt the “effect on the fact-finder approach.” The rule in civil cases, it said, should be that an error is harmless only if it is more likely than not that the error did not contribute to the verdict.

Are There Really Two Approaches? 

I am not convinced that the case law reflects two different approaches so much as two ways of describing the same approach. In my view, when prior cases describe harmless in two different ways, they are doing nothing more than describing the same coin from two opposite sides. Language in prior cases describing the harmless error test as asking whether the error “affected the verdict” may be stating nothing more than the other side of the question of of whether the verdict (i.e., the “result”) would have been different if not for the error.

If they are two approaches, the only difference between the two tests that I can think of is that under the “effect on the fact-finder” approach, an error can be harmful if it is something that the jury likely would have considered in the jury roorm, even if without the error, the jury would have reached exactly the same verdict relying on the other evidence in the case. 

A Better Test?  

I have a hard time understanding why the 4th DCA unanimously endorsed the “effect on the fact-finder” approach. How can there ever be “a miscarriage of justice” when the jury would have reached the same verdict? 

I understand the 4th DCA’s concerns about appellate courts re-weighing the evidence. The first thing any appellate attorney learns is that one should never make an argument that asks the appeals court to weigh the evidence to conclude that the jury reached the wrong verdict.

But examining the trial evidence seems unavoidable in performing a harmless error analysis regardless of the approach. That is particularly true in Florida, where the harmless error statute requires that harmless error be determined based on “an examination of the entire case.” Determining whether the error likely had an effect on the jury does not avoid that problem because one cannot determine how important evidence is without looking at its context.

I also understand the 4th DCA’s goal of enhancing predictability by creating a test that is intended to be less vague and to leave less room for arbitrariness. But I do not see how speculating about whether the jury considered particular evidence is any less vague than speculating about what result the jury would have reached if not for the error.

The 4th DCA also seems to have been concerned that its prior harmless error test was too stringent, i.e., that it made it too difficult to obtain a reversal. I have not done a statistical analysis, but I read almost every opinion issued by every DCA and the Florida Supreme Court. In my observation, which is informed but admittedly unscientific, the 4th DCA had as high a reversal rate before Special as any DCA in Florida.

So however its test was nominally described, I am not sure it was any more stringent in practice than the standards used by other DCAs. In my estimation, the 4th DCA’s ultimate formulation of the test, that an error will only be found to be harmless when the beneficiary of the error shows that is “more likely than not that the error did not contribute to the judgment” throws the balance too far in favor of reversal.

Under this test, I would expect that very few errors will be found to be harmless, and reversal will become increasingly common. As I said at the outset, there are errors in every trial. There is some evidence of this happening already. No doubt that is a good thing for parties that lose at trial. For parties that obtain favorable jury verdicts, not so much.

We Should Not Have to Wait Long for Clarification 

The real impact of the rule set down in Special has yet to be determined. The 4th DCA certified to the Supreme Court of Florida the question of what harmless error standard should be used in civil cases as a question of great public importance and the Supreme Court has taken up the issue. Briefing is complete, and the Supreme Court heard oral argument in April. It is now ripe for a ruling.

So we should not have too wait long to know how likely it will be that future mistakes, which will surely be made, will result in a new trial. 

In the past few years, the strangest things have started appearing in appellate decisions: images. That has been seen as so revolutionary that it has been widely covered in the legal press, with 7th Circuit opinions authored by Judge Richard Posner (as is often the case) drawing the most attention. The question is: why are judges now inserting images into their opinions?

The answer may be that astute judges are responding to the changing environment in which their opinions are being read. Appellate court opinions have been accessible online for years, and they are now more commonly read on “screens” — computers, iPads/tablets, and smartphones — than in books. And studies have shown that we read differently when looking at a screen than when looking at printed text on paper.

For example, here’s how scientists say our eyes track the data on a webpage:

Notice the concentration of red on the left hand border of the page created by the eye searching down the page for its structure. Note also how the eye tends to skip around.

Astute legal writers — especially appellate lawyers — would be wise to take note of how different the reading experience is on a screen, and to take it into account when drafting court submissions. That point was persuasively made during a presentation at the Florida Conference of District Court of Appeal Judges last fall (which I and other members of the Florida Bar’s Appellate Practice Section were fortunate enough to attend).

Judges (and their clerks) are increasingly reading appellate briefs and other court submissions on computer screens, and when travelling, on iPads, Kindles and other e-readers, or on smartphones. (An informal survey during another presentation at the conference revealed Florida appellate judges to be tech-savvy and partial to iPhones and iPads, although Android phones were also represented).

The trend toward screen-reading will only increase now that e-filing is replacing paper filing.

In order for an appellate brief or any piece of legal writing to be persuasive, it must command the reader’s attention. And to get and keep a reader’s attention when he or she is reading on a screen, attorneys need to adopt the format of their documents to fit the environment.

How? In much the same way as one makes a webpage easy to read and engaging. Here are some suggestions:

  • Add spacing — Text is easier to read when it is surrounded by white space. Increase margins.  Large block paragraphs extending from margin to margin are a relic of book reading. They are difficult to digest when read on a screen, particularly when read on a Kindle or similar e-reader.
  • Shorten the paragraphs. Not only do shorter paragraphs make the document more palatable to the eye (and increase white space), but they also account for the attention span issues that have been engendered by the digital age.
  • Use headings more liberally. Effective headings are alot like soundbites — they grab the reader’s attention and drive home the point quickly before that attention is lost. Hopefully, they also encourage the reader to continue to read and pay attention.
  • Insert document bookmarks. If you’ve opened a .pdf of a recent Florida Supreme Court opinion, you may have noticed a menu bar on the left hand side mapping out the sections of the opinion. Document bookmarks help the reader to get a feel for the overall structure of the document. They also help the reader to easily navigate between sections and arguments. When the reader must scroll up and down the screen to find sections, a traditional table of contents is a much less helpful roadmap than a bookmarks bar, where the reader can click right on the section he or she is looking for.

And finally there’s the most radical idea: illustration with images. This practice is the most obvious concession to the effect the internet and it remains relatively unorthodox and somewhat controversial. So a fair amount of tact and judgment is needed.

But when used appropriately, tactfully, and sparingly, images can be highly effective. (If the picture is worth 1000 words, it can also help to make the brief shorter, which judges always appreciate). If nothing else, images command attention. Just ask Judge Posner. 

The 11th Circuit is back in full swing releasing opinions after a brief hiatus during the holiday season. Among the decisions handed down last week was Storcher v. Guarantee Trust Life Insurance Company, a decision on insurance coverage under a home health care policy.

At issue was whether a policy covering “[v]isits by a Home Health Aide to provide custodial care and other personal health care services specifically ordered by a Doctor” required the insurer to pay for care provided by the staff of an assisted living facility to a resident. The Eleventh Circuit held that it did.

That result may seem odd given that we often think of “home health care” as care provided to a patient living independently in a house or apartment, as contrasted with care administered in a hospital, nursing home, or similar facility. Assisted living facilities would seem to fall somewhere in between those alternatives.

But the court didn’t confront the status of assisted living facilities head on, as the insurer conceded that the care was administered to Storcher was in his “home.” The opinion does not disclose the policy’s definition of “home,” but I suspect that this concession was necessitated by a broad definition that (perhaps unintentionally) could not reasonably be said to exclude assisted living facilities.

Instead, the insurer tried to raise the issue from the other side, contesting coverage by arguing that the assisted living facility staff members who provided the care were not “Home Health Aides,” i.e., employees of a “Home Health Care Agency.” Unfortunately for the carrier (and fortunately for Storcher), however, that term was also broadly defined to include “a service or agency which is licensed by or legally operated in your state” except for Employment Agencies and Nurse Registries.

The insurer argued that this definition, and its exclusion of the two types of entities that were allowed to provide home health care without a license at the time the policy was issued, showed that the policy only covered care provided by licensed home health agencies. And the facility where Storcher was living was licensed as an assisted living facility, not a home health agency. (After the policy was issued, the home health agency statute, Florida Statutes Section 400.464, was amended to specifically exempt assisted living facilities from licensing under that statute so long as they are licensed as assisted living facilities.) So the carrier argued that since the assisted living facility wasn’t licensed as a home health agency, the care it provided wasn’t covered. 

But as in many cases where coverage is contested based on policy language that was assertedly intended to track statutory language, the 11th Circuit was unwilling to entertain that argument in the face of broad policy language that the court felt was unambiguous and had a simple meaning that did not explicitly so limit coverage. 

It looks like I spoke too soon. Not long after I wrote that the 3rd DCA would not be offering its view on when auto insurers may take advantage of the 2008 amendments to Florida’s No Fault Law to limit personal injury protection reimbursements, declining to answer certified questions in  U.S. Security Insurance Company v. Professional Medical Group, Inc., the court decided to address the issue confronted by the 4th DCA in Kingsway Amigo after all. In Geico Indemnity Company v. Virtual Imaging Services, Inc. (released on November 30, 2011), the 3rd DCA answered a question certified as a matter of great public importance similar to the question in Kingsway Amigo (covered here):

May an insurer limit provider reimbursement to 80% of the schedule of maximum charges described in F.S. 627.736(5)(a) if its policy does not make a specific election to do so?

Over Judge Rothenberg’s vigorous 20 page dissent, Judge Cortinas, writing for the court majority consisting of himself and an associate judge, said no, agreeing with the 4th DCA that an auto insurer cannot limit reimbursements to 80% of 200% of the amount provided in Medicare Part B fee schedules unless the insurance policy states explicitly that this reimbursement methodology may be used.

The majority relied in part on Kingsway Amigo and the primary case that decision relied on, State Farm Insurance Co. v. Nichols, 21 So. 3d 904 (Fla. 5th DCA 2009), but diverged a bit from their reasoning. The primary thrust of the analysis in Geico deals with whether using the Medicare Part B-based reimbursement limits under section 627.736(5)(a)(2)(f) is an alternative to reimbursing for “reasonable” expenses per section 627.736(a)(1), or is merely a statutorily defined method of fixing what “reasonable” expenses are.

That question mattered because Geico’s policies stated that it would pay, “in accordance with and subject to the terms, conditions, and exclusions of the Florida Motor Vehicle No-Fault Law, as amended…80% of medical expenses,” with “medical expenses” defined as “reasonable expenses.” So if 80% of 200% of Medicare Part B = reasonable expenses, then the policies could be characterized as stating that this reimbursement formula might be used. Judge Rothenberg agreed with Geico that this was the proper way to understand the statute and the policies, and as such, the policies could not reasonably be read to affirmatively elect to reimburse based on reasonableness rather than taking advantage of the Medicare Part B methodology.

The majority, however, understood section 627.736(5)(a)(2)(f) to offer an alternative option for calculating reimbursements:

Geico was faced with at least two ways of reimbursing reasonable medical expenses: (a) reimbursing Virtual Imaging for 80% of the amount billed, or (b) reimbursing them for 80% of 200% of the amount listed on the Medicare fee schedule.

At the very least, according the majority, the statute is ambiguous on this point. If it is ambiguous, then the policies, which incorporate the statute by reference, are also ambiguous. And when an insurance policy provision is ambiguous, i.e., susceptible to two reasonable interpretations, Florida law requires courts to adopt the interpretation that favors coverage. Thus, the majority concluded that the policies had to be understood as not allowing Geico to limit reimbursements based on Medicare Part B rates.

Judge Rothenberg disagreed, explaining that prior to the 2008 amendments, insurers could anyway have reimbursed based on Medicare Part B if they stated in their policies that they would use that methodology. In her view, the point of the 2008 amendments was to avoid litigation over what reimbursement amounts were “reasonable,” by giving insurers “safe harbor” amounts (80% of 200% of Medicare Part B amounts) that the statute deems to be per se reasonable. As such, there aren’t alternative options for reimbursing providers under PIP; there’s only one: paying “reasonable” rates. Using the Medicare schedules is simply a safe harbor for determining what “reasonable” means.

The Bottom Line

The result in Geico obviously reinforces the 4th DCA’s decision in Kingsway Amigo, and avoids the inter-district conflict that insurers might have hoped would lead the Florida Supreme Court to take up these issues in Kingsway Amigo (or Geico). Given that the issue has been certified as an issue of great public importance by at least two trial courts, Geico’s best hope might be in trying to convince the 3rd DCA to do the same, which would seem its best available route to the Supreme Court.

The 3rd DCA’s decision may also may make it more difficult to convince other DCAs to reach a different result from the 4th DCA if and when they confront the issue addressed in Kingsway Amigo. On the other hand, ithe fact that a District Judge has now issued a long, reasoned explanation (albeit in dissent) for why the opposite result should be reached might give other District Judges reason for pause.

But pending further developments, Kingsway Amigo and Geico are effectively the law of the land throughout Florida, so section 627.736(5)(a)(2)(f) cannot be used to limit reimbursements unless the insured’s policy states that those limits will be used. And insurers that want to take advantage of the statutory maximums going forward should ensure that their policies unambiguously disclose the intent to do so.

I’d be surprised if any 2011 decision of Florida’s appellate courts has drawn more attention in legal, medical, and insurance professional circles than the Fourth District Court of Appeal’s decision in May (covered in this post) in Kingsway Amigo Insurance Company v. Ocean Health Inc. In case you missed it (i.e. you either aren’t a PI or insurance defense lawyer, a doctor that treats accident victims, or insurance company employee or you are and have been living in a cave for the last 6 months) the 4th DCA held in Kingways Amigo that auto insurers cannot rely on the 2008 amendments to Florida’s No Fault law (PIP) that allow PIP reimbursement rates to medical providers to be limited to 80% of 200% of Medicare Part B reimbursement amounts unless the applicable insurance policy says explicitly that providers’ reimbursement rates may be so limited. 

There have been several further developments in and related to that litigation:  

  1. The court’s decision has caused considerable angst to Florida automobile insurers, with 5 of them submitting amicus curiae briefs in support of Kingsway Amigo’s motion for rehearing and rehearing en banc by tthe 4th DCA.  Nonetheless, the 4th DCA denied the motions.  The 4th DCA’s decision has now become final, and is reported at 63 So.3d 63.
  2. As noted in the comments to my prior post on the case, the same issue had been teed up for the 3rd DCA in U.S. Security Insurance Company v. Professional Medical Group, Inc., raising the possibility that a decision in that case could either (a) solidify the 4th DCA’s holding if the 3rd DCA came out the same way; or (b) create a conflict among the Districts that would confer discretionary jurisdiction for Supreme Court review if the 3rd DCA disagreed with the 4th.  But earlier this month the 3rd DCA declined to do either one, and relinquished jurisdiction over U.S. Security.  Its reason for doing so appears to be that the parties’ briefing and oral argument revealed that the case was too “fact-specific.” 
  3. Having been denied rehearing by the 4th DCA, and without the benefit of a conflicting (or any) decision in U.S. Security, Kingsway Amigo has asked the Florida Supreme Court to accept review over the case.  It argues in its October 17, 2011 Brief on Jurisdiction* that the 4th DCA’s decision conflicts with statements by other Districts in certain cases involving the PIP statute.  Ocean Health replies in its own Brief on Jurisdiction that there can be no direct and express conflict between Kingsway Amigo and any of the cases cited by the insurer because none of those decisions addressed the precise issue confronted by the 4th DCA, and, in fact, Kingsway Amigo addressed a matter of first impression in Florida appellate courts.  Ocean Health even goes so far as to request that Kingsway Amigo be ordered to pay for its attorney’s fees.

FWIW, I don’t think the Florida Supreme Court is particularly likely to accept review of Kingsway Amigo.  But the issue in dispute isn’t going away, and may well make it to the Court eventually, as I expect that other Districts will weigh in on the issue sooner or later. 

*  To request discretionary review by the Florida Supreme Court, parties generally must file a Notice to Invoke Discretionary Jurisdiction and a brief explaining why the Court has jurisdiction over the case and why it should choose to exercise that jurisdiction.  The opposing party may then file an answer brief addressing those issues.)          

The Florida Supreme Court returned from its summer hiatus last week with its first regular release of opinions since July 8, and sent this message: when the grandkids come to visit, don’t let them drive your car! 

Among the new opinions released on Thursday, August 25, 2011 was State Farm Mutual Automobile Insurance Co. v. Menendez, which resolved a split between the 3rd and 4th DCAs on the application of so-called “Household Exclusion” clauses in auto insurance policies when an accident occurs while an insured vehicle is being driven by someone who does not live with the policyholder, and a passenger who lives with the driver (but not the policyholder) is injured.

In Menendez, Grandma was the named insured under a State Farm policy and the vehicle’s owner. Granddaughter and her Mom and Dad (who lived with her, not with Grandma) went for a ride in Grandma’s car. Grandma let Granddaughter drive. Granddaughter got into an accident. Everyone was injured.

The question was: Was State Farm on the hook to indemnify their injuries? Under the Household Exclusion in the policy, State Farm was off the hook for coverage of injuries suffered by “any insured or any member of an insured’s family residing in the insured’s household.” The effect of the household exclusion is straightforward in the common scenario, where a named insured (Grandma) is driving, and a family member who lives with her (e.g., Grandpa) is injured. The Household Exclusion operates to exclude coverage for Grandpa’s injuries.

But the situation in Menendez was trickier, because Grandma’s policy also indemnified her for accidents that might occur while her car was being driven by someone who borrowed it. And to that end, the policy defined the term “insured” as including “any other person while using such a car” with the named insured’s consent.

The good news for Grandma is that when Granddaughter was driving Grandma’s car, she was considered to be an “insured” under the policy, so State Farm, not Grandma, would be on the hook for claims by injured third parties. The bad news for Grandma is that since Granddaughter is an “insured,” her injuries aren’t covered under Grandma’s policy.

The question was whether the Household Exclusion also precludes coverage of injuries to family members who don’t live with the named insured but do live the authorized borrower of the car who is deemed to be an “insured” under the policy.  In other words, were the injuries suffered by Granddaughter’s Mom and Dad, who lived with her, but not Grandma, excluded from coverage by the Household Exclusion? 

The Supreme Court unanimously held that they were.  Like most appellate decisions in insurance coverage disputes, the discussion began and ended with interpreting a single phrase, in this case the Household Exclusion’s wording that it excluded injuries to ““any member of an insured’s family residing in the insured’s household.” 

The court had little trouble concluding that this phrase “unambiguously excludes coverage for any bodily injury claims asserted by members of a permissive-driver insured‟s family residing in the household of the permissive-driver insured.”  That conclusion followed naturally from the policy’s definition of the term “insured” as including permissive drivers such as Granddaughter as well as the named insureds.  “Named insured” was a separately defined term under the policy, so the clause would have used that term if only the members of the named insured’s household were to be excluded.   

Although Grandma’s side (as well as the trial court and the 3rd DCA) thought it significant that the phrase referred to family members of “an insured” but used the term “the insured” when referring to who those family members must live with to be excluded, the Supreme Court found that distinction unimportant.  The policy used the phraseology of “an insured” and “the insured” interchangeably, it said, so there was no reason to think that using “the insured” in this phrase signified that only members of the named insured’s household were excluded. 

Given this unanimity and what seems like a pretty straightforward construction of the policy terms, you might ask why the 3rd DCA (and trial court) didn’t reach the same result.  My hunch — and it’s only a hunch — is that it may have had something to do with the commonly understood notion of what household exclusions are supposed to do.  

That is to say those exclusions have historically been understood to be directed at excluding claims by immediate family members against the policy owner (e.g., my daughter sues me for injuries she suffered in an accident we got into while I drove her to school), which due to both parties being part of the same economic unit, is a lot like suing yourself and carries the potential for fraudulent and/or collusive claims. 

But suppose I lend you my car, which I know has faulty brakes.  When the brakes inevitably fail, you get into an accident.  After taking your daughter home from the hospital, you sue me for negligently causing the injuries your daughter suffered in the accident.  Now it seems a lot less intuitive that your claims should be excluded from coverage.  In that scenario, the fraud/collusion rationale doesn’t apply, and it makes a lot less sense to exclude coverage of your daughter’s injuries simply because she lives with you.  There’s also the anomaly that resulted in Menendez case that if Grandma had driven rather than riding shotgun, Mom and Dad’s injuries would have been covered, because Granddaughter wouldn’t have been an “insured,” and they didn’t live with Grandma.     

It’s hard to know whether those types of considerations played any role in the courts below, but they obviously didn’t sway any of the Supreme Court justices. Instead, Menendez joins a long list of decisions showing that when it comes to interpreting insurance policies, about the only thing the Court cares about is the literal meaning of the words and phrases used in the policy. Whether or not that may lead to counterintuitive results.

But if Grandma had simply driven instead of letting Granddaughter do it, everyone’s injuries would have been covered, except of course for Grandma’s injuries.  So the other lesson here for grandparents is not to let your grandchildren drive when they come to visit.  Or make sure they don’t get into accidents.

It’s hard to confuse the First District Court of Appeal of Florida (in Tallahassee) with its namesake in California. It’s even harder to confuse with that court’s San Francisco neighbor, the U.S. Court of Appeals for the Ninth Circuit.  The 9th Circuit has a reputation (deserved or not) for issuing controversial decisions on hot button issues – often to the displeasure of the U.S. Supreme Court.

The 1st DCA (of Florida) has no such reputation. So some might be surprised by the outcome of two recent worker’ compensation appeals (the 1st DCA has jurisdiction over all workers’ compensation appeals). In recent weeks, the 1st DCA has handed down decisions in two separate cases affirming the right of immigrants working in the U.S. illegally to receive workers’ comp benefits.

In the first of those decisions, HDV Construction Systems, Inc. v. Aragon, No. 1D10–6401 (handed down on June 28, 2011), the 1st DCA held that an employer was on the hook for permanent total disability (PTD) benefits for an unauthorized worker because it knew or should have known that he could not work legally in the U.S., but continued to employ him anyway until he was permanently injured.

In the second, Garcia-Lopez v. Affordable Plumbing/Vinings Insurance Company, No. 1D10–4949 (issued on July 18, 2011), the 1st DCA required an employer to cover workers’ comp benefits for a Mexican immigrant (employed through a third party with knowledge of his status) who was underage in addition to lacking authorization to work in the U.S., rejecting the argument that he could only be compensated for lost income if he proved that he reported his income to the IRS.

What happened?  Has the ideological outlook of San Francisco overtaken Tallahassee?! I don’t think so, as I’ll explain below.

Continue Reading Illegal Immigrant Workers’ Comp Claimants Win 2 Rounds in the 1st DCA

Real electronic filing may finally make its way to Florida courts in the not-too-distant future.  But before that happens, the Florida Supreme Court wants to make sure that there isn’t too much private information in court filings for the public to access.

On June 30, 2011, the Court adopted sweeping new rules about what information can and can’t be put in the court file.  Florida litigators who want to avoid the sanctions that can be imposed for violating the new rules shouldn’t wait too long to become familiar with them — they are going into effect on October 1, 2011.

For the time being, the privacy rules don’t affect criminal cases, for the most part, but they affect all civil cases.  And the reprieve in criminal cases isn’t likely to last very long.

Here is a breakdown of the Rule changes you need to know:

Florida Rule of Judicial Administration 2.425

Rule of Judicial Administration 2.425, which was added by the Court’s June 30, 2011 Amendments, contains the overarching principles. So if you learn that Rule (and remember to apply it in whatever context you find yourself) you’ll be most of the way there. But one caution: Rule 2.425 only states a default rule — it gives way to conflicting Rules, statutes, and orders.

This chart spells out the types of information that are subject to Rule 2.425:

Restricted Info:     Can include in a filing?           Exceptions:

Child’s Name           Initials only                        Orders re: time-sharing, parental
                                                                   responsibility, or child support. 
                                                                   Any document re: child’s ownership of real property.
Birthdates               Year only                           Any party’s full birthdate in writ of attachment
                                                                   or notice to payor. Child’s full birthdate when
                                                                   necessary for jurisdiction.
Social Sec. #s              No                               General exceptions
Bank Account #s           No                               General exceptions
Credit/Debit Card #       No                               General exceptions
Charge Account #          No                               General exceptions
Drivers License #          Last 4 digits only            General exceptions
Passport #                   Last 4 digits only            General exceptions
Taxpayer ID #              Last 4 digits only            General exceptions
Employee ID #             Last 4 digits only            General exceptions
Phone #                      Last 4 digits only            General exceptions
Insurance Policy #         Last 4 digits only            General exceptions
Loan #                        Last 4 digits only            General exceptions
Patient/health care #      Last 4 digits only            General exceptions
Customer Accont #        Last 4 digits only            General exceptions
Email address               Truncated                      General exceptions
User name                   Truncated                      General exceptions
Password                     Truncated                      General exceptions
PIN #s                        Truncated                      General exceptions
Other sensitive info:      Truncated as per court order

General Exceptions:

  • Statute, Rule or Order authorizes the inclusion of the information in a filing
  • Account number is necessary to identify property at issue in a case.
  • Information that is “relevant and material to an issue before the court.” [!!! This looks to me like an exception that you could drive a truck through.  It’ll be interesting to see how courts interpret it.]
  • Records in an administrative, agency, appellate, or review proceeding.
  • Information used by the clerk or the court for file and case management purposes.
  • Criminal cases are temporarily exempt.
  • Traffic court cases are temporarily exempt.
  • Small claims cases are temporarily exempt.

A Few Other Notes:

What effect does Rule 2.425 have on parties’ ability to obtain a protective order?  According to the Rule itself, none.  But I’d be surprised if judges’ opinions on what information should be kept private were not influenced by the views of the Supreme Court as expressed in Rule 2.425.

The Rule also claims that it “does not affect the application of constitutional provisions, statutes, or rules of court regarding confidential information or access to public information.”  I’m not sure how that could be so, but again, we’ll see how courts interpret that subsection.

The Court is also amending quite a few other Rules to accomodate Rule 2.425.  Changes are being made to the Rules of Civil Procedure, particularly with regard to filing discovery documents, the Family Law Rules of Procedure, the Rules of Appellate Procedure, Probate Rules, and to a lesser extent, Criminal Procedure and Small Claims Rules, as well as several forms.

The amendments to those rules and forms are listed below. 

Continue Reading A Primer on the New Privacy Rules for Florida Court Filings