Face-to-Face Encounters: Avoiding Liability for Abandonment

Providers are at risk for legal liability when they terminate services to patients. Termination of services has historically been warranted by the following circumstances, among others: violence or threatened violence, noncompliance by patients and/or primary caregivers, inability to provide adequate assistance, or inappropriateness for services. Providers are understandably concerned about the possibility of legal liability associated with the termination of beneficial services.

Specifically, they frequently express concern about the possibility of liability for abandonment of patients. The Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services (DHHS), the primary enforcer of fraud and abuse prohibitions, has indicated that abandonment of patients may also constitute fraudulent conduct.

Providers now have new concerns regarding liability for abandonment in light of requirements for face-to-face encounters. Specifically, providers may not be paid for services rendered if patients have not had appropriate face-to-face encounters with physicians during required time periods. It is important, therefore, for providers to understand how to terminate services without liability for abandonment.

Practitioners often speak of abandonment as though it is equivalent to termination of services. On the contrary, patients who want to hold providers liable for abandonment must show that:

1. Providers unilaterally terminated the provider/patient relationship;
2. Without reasonable notice;
3. When further action was needed.
Patients who fail to prove any one of these requirements are likely to lose their lawsuits against providers.

The second requirement of abandonment provides a key basis for avoiding liability for abandonment. Providers will not be liable for abandonment as long as they give patients reasonable notice prior to termination of services. The key question is: what is "reasonable" notice, especially in view of new face to face encounters?

Many providers historically viewed thirty days as the minimum number of days required for reasonable notice. This period of time is too long for most patients, including patients who have not had required face-to-face encounters. A more reasonable period of time for most patients, unless a specified period of notice is mandated by state statute or regulation, is probably one to three days.

After staff members agree upon a reasonable notice period, patients and attending physicians should receive verbal and written notice. Written notices should be hand-delivered to patients’ homes. Although it is desirable, it is unnecessary to obtain a signature verifying receipt. Written notices to physicians should be faxed to them.

When the date for termination of services arrives, providers must terminate care as planned. Practitioners are sometimes tempted to continue in the face of pleas from patients, physicians, and/or family members. Providers must bear in mind, however, that their organizations, whether for-profit or not-for-profit, simply cannot afford to render unlimited amounts of uncompensated care. The consequence of lack of attention to fiscal limitations may be the disruption or unavailability of care to many patients.

Finally, providers can defeat claims of abandonment if patients for whom services are discontinued need no further attention. How do providers know whether further attention is needed? Is this requirement as subjective as it appears? On the contrary, judges are likely to make retrospective determinations about whether further attention was needed. The basis for such determinations will probably be whether patients were injured as a result of termination.

In other words, the law is likely to conclude that no further attention was needed, so long as patients are not injured as a result of termination of services. What kind of injury must patients prove? Can patients who attempt to prove emotional damage only as a result of termination of services by case managers win lawsuits?

The "good news" for providers is that courts generally require proof of physical injury or damage before they will find providers liable for abandonment. Providers must, therefore, take appropriate steps to make certain that patients are not physically injured as a result of termination of services. In rare instances, appropriate action may include sending an ambulance to take the patient to the nearest hospital. If the patient refuses transport by ambulance, the patient will have been contributorily negligent or will have assumed the risk, so providers are likely to avoid liability.

Now is the time for providers to educate themselves about the possibility of liability for abandonment. Positive steps must be taken in order to prevent this type of legal liability in view of the uncertainty of the impact of requirements for face-to-face encounters.

by Elizabeth E. Hogue, Esq.

Florida Arrests Alleged Citizens Property Scammer

Florida Chief Financial Officer Alex Sink today announced the arrest of Aylin Hernandez, 23, of Miami, for fraudulently diverting mail and stealing payments intended for Citizens Property Insurance Corporation.

Hernandez was arrested this morning and booked into the Turner Guilford Knight Correctional Center in Miami-Dade County on charges of organized fraud and grand theft. The arrest results from an investigation by the Division of Insurance Fraud, with assistance by Citizens Property Insurance Corporations' Special Investigations Unit. If convicted, Hernandez faces up to 45 years behind bars.

"This fraudster is getting exactly what she deserves—serious jail time," said Sink, in a statement. "I am grateful for the work of my investigators and Citizens' Special Investigations Unit for working together to put her behind bars. Would-be scammers out there need to know that this kind of action will not be tolerated."

Working with investigators from Citizens Property Insurance Corporation, the Division of Insurance Fraud established that Hernandez created her own corporation named Citizens Property Insurance, Inc., and opened an account under that name at Check Cashing USA.

Using information she obtained while working as a clerk in several local insurance agencies, Hernandez sent invoices to various law offices and title companies, which were handling homeowners insurance escrow and service payments. The victims, believing their payments were going to the legitimate Citizens Property Insurance Corporation, sent eight checks totaling over $12,000, which were then cashed by Hernandez.

Departure of Insurer from Florida Points Up Fraud Problem

With a letter sent out a few weeks ago, Explorer Insurance announced that it will no longer write private automobile policies in Florida because there is too much fraud.

"The company is taking this action in light of poor ongoing business results in Florida, particularly in the area of private passenger automobile no-fault coverage, in which loss fraud has been rampant with no signs of abatement," Explorer vice president, Steve Frisina, said in the letter to Florida's Office of Insurance Regulation.

The letter said Explorer intends to send termination notices to agents who sell its coverage within a week of the Office's acceptance of its plan. Policy holders will begin receiving non-renewal notices also within one week. And, by January 2012, no Explorer policies will remain in effect.

The Office has deferred accepting Explorer's plan for the time being present, until the company can fix some of the details of its exit.

In the meantime, however, Explorer has severely restricted the number of policies its agents are allowed to write and has told agents it is no longer paying commissions as of this week, according to a Tampa agent.

"They were going to be over $100,000 in premiums for us this year," said John Guthrie, of the John Guthrie Agency, Tampa. He has had severe restrictions on the number of policies he can write for Explorer since May.

Guthrie said that fraud is a big problem that is chasing many auto insurance carriers out of the market. Last year at this time, his agency represented 16 or 17 carriers, he said. Now the agency is down to three.

"The companies are all just pulling out or they are making underwriting so restrictive that you can't get the people through the approval," he said.

In May, the National Insurance Crime Bureau released a report that said that Florida has led the nation in suspected staged auto accidents the last three years in a row. According to the report, Florida had 3,006 suspicious claims from 2007 to 2009, and that was almost twice as many as the two states with the next most suspicious claims, New York and California.

The worst place in Florida was Tampa, the report said. Previously the worst place had been Miami and South Florida. But, in 2009, there were 487 questionable claims related to staged accidents in Tampa, while there were only 258 such claims in Miami.

Guthrie said he and some of his fellow agents in Tampa's Hillsborough County have gotten so frustrated by the situation, and by the lack of government action to crack down, that they have begun collecting petition signatures from new policy and renewal clients and forwarding that petition on to the Department of Financial Services, which houses the Division of Insurance Fraud.

"They need to do something about this fraud," he said.

Jack McDermott, a spokesperson from the Office of Insurance Regulation, said that fraud was not the responsibility of his agency so they do not know much about it. But "We have heard, anecdotally, from other companies that they have been having trouble with fraud," he said.

Explorer, which is based in Santa Clarita, Calif., is a member company of the ICW Group, San Diego. Until now, it has sold automobile policies only in California and Florida.

As of the end of July, the company had 16,576, in-force policies in the private passenger automobile insurance line in Florida, with direct written premiums of $16.1 million and a loss ratio of 124.2.

Eileen Beaudette, an agent in Naples who has been an Explorer representative, said that in her area fraud and staged crashes are not a big problem and she has not had carriers stop writing. But she has been aware that it is a big problem in Tampa and on the east coast of the state.

"We've been lucky," said Beaudette, of A Auto Buyers Insurance. "We still have a lot of carriers writing."

Beaudette said that Explorer was never a very big part of her agency's business because their rates were not very good.

AIG Settlement Covers $60 Million of Ex-CEO, Ex-CFO Costs

Former longtime AIG chief Maurice ''Hank'' Greenberg and another former executive will get $60 million from the company's insurers to cover legal and other costs as part of a proposed settlement of investor lawsuits, court papers show.

The payouts to Greenberg and former Chief Financial Officer Howard Smith are in addition to $90 million that American International Group Inc.'s insurers, as previously reported, will pay directly to the company as part of the proposed settlement.

The $150 million of payouts were revealed in an Aug. 25 agreement filed in Delaware Chancery Court, and obtained Friday by Reuters.

They stem from litigation in which investors accused more than 20 onetime AIG executives and directors of poor oversight and allowing improper bonuses. The Delaware lawsuit was filed by investors on behalf of AIG.

Greenberg left AIG in March 2005 after nearly four decades at the helm.

AIG in November 2009 said it had resolved all litigation with Greenberg, and agreed to reimburse him and Smith for as much as $150 million of legal fees and expenses, according to an agreement filed with U.S. regulators.

The $60 million payout by insurers is separate from that agreement, and Greenberg and Smith represented in the earlier agreement that no one else other than the insurers was obligated to indemnify them for the relevant costs.

AIG had $200 million of insurance for directors and officers, the Delaware agreement shows. None of the sums being paid go to investors, and Greenberg and Smith are also not responsible to pay out money in connection with the agreement.

In emailed statements, AIG said it was pleased the matter has been resolved, as did Lee Wolosky, a partner at Boies, Schiller & Flexner LLP who represents Greenberg.

A lawyer who signed the Aug. 25 agreement on behalf of Smith did not immediately return a call seeking comment.

The Delaware agreement requires approval of Vice Chancellor Leo Strine of the Delaware court. A settlement will be made final upon the dismissal of similar litigation in Manhattan federal court, the agreement shows.

Based in New York, AIG in September 2008 narrowly averted collapse after becoming overexposed to risky debt. It accepted a federal bailout that grew to $182.3 billion and left taxpayers owning a nearly 80 percent stake.

Six weeks ago, AIG agreed to pay $725 million to settle a shareholder class-action lawsuit led by Ohio Attorney General Richard Cordray, who accused it of accounting fraud and trying to manipulate its stock price.

AIG still faces shareholder class-action litigation in Manhattan federal court. Greenberg has sought to dismiss a civil fraud lawsuit by New York Attorney General Andrew Cuomo over a sham reinsurance transaction.

The case is In re: American International Group Inc Derivative Litigation, Delaware Chancery Court, No. CA 769.

Stanford Execs Deny Key Role in Alleged Fraud Cited by Lloyd's

Lawyers for Texas financier Allen Stanford and two accounting executives who worked for him sought to distance their clients Friday from the alleged financial wrongdoing insurer Lloyd's of London cites as a reason to void a policy covering their defense fees.

"Mr. Stanford was not really a hands-on guy,'' Robert Bennett, Stanford's attorney, said during closing arguments after four days of hearings in federal court. "Mr. Stanford was not at the center of anything illegal or wrong.''

The nondisclosure of a nearly $2 billion unsecured loan to Stanford, misrepresentations to investors and phony accounting are all grounds to stop paying claims under a directors and officers policy, the British insurer said.

Stanford, accounting executives Mark Kuhrt and Gilbert Lopez and Chief Investment Officer Laura Holt have sued Lloyd's of London over payment of the fees. But that policy has a money laundering exclusion, so Lloyd's must prove to U.S. District Judge Nancy Atlas in Houston that the plaintiffs committed that act.

Holt struck a deal with the insurer before the start of the hearings last Tuesday. She and the three other plaintiffs in this case are accused of participating in an alleged $7 billion Ponzi scheme centered around fraudulent certificates of deposit (CDs) issued by Stanford's offshore bank in Antigua.

"It is clear that the money collected for the CDs was criminal property as defined by the policy,'' said Barry Chasnoff, an attorney for Lloyd's. "There was no evidence offered to the contrary.''

BLAME DAVIS

Lawyers for Stanford and the accounting executives have placed a lot of the blame on James Davis, the former chief financial officer of Stanford International Bank Ltd. (SIB) who pleaded guilty last August to three felony counts related to the scheme.

Davis had the final sign-off on numerous financial documents from SIB, the institution the government claims is at the center of the alleged scheme, lawyers and witnesses said.

"I believe that Mr. Kuhrt and Mr. Lopez were middle-level accounting managers and it was Mr. Davis' responsibility to deal with the auditors on these issues,'' Alan Westheimer, an accountant hired by Kuhrt and Lopez as an expert witness, testified.

Stanford also relied on Davis -- his former No. 2 man at the company and former classmate from Baylor University -- as well as on the professional advice of accountants and lawyers, Bennett told the hearing.

Still, Atlas told the hearing it was clear to her that Lopez and Kuhrt "were close to the top,'' and were close to Davis.

She said she had a suspicion that Lloyd's would not be fronting legal fees to the men after the hearings.

Lloyd's has advanced as much at $6 million to pay for Stanford's attorneys, many of whom have left the case or been fired by their client.

Stanford, who is 60 and is in jail awaiting a January trial, faces one count of conspiracy to commit money laundering as part of a 21-count June 2009 indictment.

The hearings were seen as a preview of Stanford's criminal case. Many people involved in the case, including Stanford and Lopez, invoked their Fifth Amendment right and did not testify, so much evidence centered on documents that are part of the government's civil and criminal case.

The case is Laura Pendergest-Holt, R. Allen Stanford, Gilbert Lopez and Mark Kuhrt v Certain Underwriters at Lloyd's of London and Arch Specialty Insurance Co, U.S. District Court, Southern District of Texas, No. 09-3712.