US Supreme Court to Review Manville Asbestos Bankruptcy Order

The US Supreme Court has decided to review a decision interpreting a 1986 Bankruptcy confirmation plan order. The order formed the basis of a settlement by Travelers Insurance Company to resolve claims against it for conspiracy in concealing information about the dangers of asbestos.

In 1986, the U.S. Bankruptcy Court for the Southern District of New York (Lifland,J.) confirmed a landmark plan of reorganization for Johns¬-Manville Corporation that channeled hundreds of thousands of asbestos-related personal injury claims into a special trust fund for the benefit of injured workers and their families. The linchpin of this reorganization was the contribution of tens of millions of dollars Petitioners and other insurers into a trust for payment of asbestos claims in exchange for protection from future claims against the insurers, all of which was intended to provide Petitioners with full and final protection from suits relating to, arising from or in connection with the Petitioners' insurance relationship with Johns¬Manville. The Manville confirmation order was affirmed in a final judgment rendered by the Second Circuit in 1988.

The confirmation order in Manville was subsequently ratified by the U.S. Congress (see 11 U.S.C. 524(h)) and used as a model for Section 524(g) of the Bankruptcy Code. In the decades following the entry of the final judgment affirming the Manville plan of reorganization, and in reliance on the protections enacted by Congress, of billions of dollars have been paid into "524(g) trusts" for the benefit of hundreds of thousands of asbestos claimants. In 2002, Petitioners sought to enforce the court's orders when certain asbestos claimants tried to evade the confirmation order by suing Travelers directly in so-called "direct actions." The suits were enjoined by the bankruptcy court that fashioned the Manville plan of reorganization, which held that they were proscribed by the 1986 confirmation order. The bankruptcy court's decision was affirmed by the District Court, but in February over two decades after the original orders became final, a different panel of the Second Circuit held that the bankruptcy court lacked authority in 1986 to enter confirmation order that extended beyond the "res" of the debtor's estate, i.e., insurance policy proceeds.

The question presented, therefore, is: Whether the court of appeals erred in categorically holding that bankruptcy courts do not have jurisdiction to enter confirmation orders that extend beyond the "res" of a debtor's estate, despite this Court's recent ruling that "[t]he Framers would have understood that laws 'on the subject of Bankruptcies' included laws providing, in certain respects, for more than simple adjudications of rights in the res," Central Virginia Community College v. Katz, 546 U.S. 356, 370 (2006), and whether the court of appeals compounded error by:

(a) failing to apply as written a federal statute (11 USC §§ 524(g) and (h)), by limiting the scope of relief in a manner that is contrary to the express terms andpurposes of that statute;

(b) failing to give effect to the Supremacy Clause and holdings of this Court that federal bankruptcy relief cannot be overridden by rights alleged to have beencreated under state law; and

(c) failing to respect important principles of finality and repose, and the express provisions of § 524(g), by failing to approve a federal court's enforcement of a confirmation order that was affirmed over two decades ago on direct appeal.

08-295 TRAVELERS INDEMNITY CO. V. BAILEY, DECISION BELOW:517 F.3d 52

Federal Appeals Court Upholds Constitutional Challenge Against CMS Memo

In a significant decision the 10th Circuit Federal Court of Appeals ruled that a constitutional challenge against the CMS 2005 CMS memo on future medical benefits in workers' compensation claims may proceed. The Court reversed the decision of the trial court and remanded the case for further proceedings.

"This suit arose after CMS clearly rejected such use of § 411.47, declaring that it applies only to medical expenses incurred before the workers' compensation settlement. In a memorandum issued on July 11, 2005 (the 2005 Memo), it said.

Q11. Compromising of Future Medical Expenses-Does CMS compromise or reduce future medical expenses related to a [workers' compensation] injury?

A11. No. Some submitters have argued that 42 C.F.R. § 411.47 justifies reduction to the amount [set aside for Medicare in a workers' compensation settlement]. The compromise language in this regulation only addresses conditional (past) Medicare payments. The CMS does not allow the compromise of future medical expenses related to a [workers' compensation] injury."

The Court ruled:

"In light of this precedent, we conclude that Protocols has suffered an actual injury. It admits that it has arranged settlements that are contrary to what CMS has declared to be required. As a result, CMS may sometime in the future demand that Protocols reimburse Medicare for Protocols' portion of settlement proceeds. And according to affidavits submitted by Protocols, this potential liability has a present impact on its business-that is, the contingent liability has created an actual and imminent injury."

07-1175 - Protocols, LLC v. Leavitt (12/11/2008)

Parent Corporation Has 3rd Party Lien Rights

A NJ Appellate Court ruled that a workers' compensation carrier is permitted to enforce its right reimbursement against the third party recovery from a parent company of the employer.  Liberty Mutual was permitted to "pierce the corporate veil." The Court declared, "...To do otherwise would be to condone a situation in which an injured employee collects workers' compensation benefits and thereafter receives monetary damages in a third-party liability action with no obligation to reimburse the workers' compensation insurer."

LIBERTY MUTUAL INSURANCE COMPANY v. CIPRIANO

Decided Dec. 10, 2008.

Washington Supreme Court Restricts Asbestos Claims

The Washington Supreme Court has taken a step back in time and rendered two significant decisions limiting he rights of asbestos victims to gain recovery. The Court ruled that if a company did not make asbestos products or manufacture them there was no duty to war. Speaking for the minority, Justice Debra Stephens wrote, "no duty to warn of a serious hazard it knew or should have known was involved in the use of its product ignores logic, common sense, and justice." 

Decisions

Dec. 11, 2008	80251-3	-	Braaten v. Saberhagen Holdings
Dec. 11, 2008	80251-3	-	Braaten v. Saberhagen Holdings (Dissent)

ec. 11, 2008	80076-6	-	Simonetta v. Viad Corp.
Dec. 11, 2008	80076-6	-	Simonetta v. Viad Corp. (Dissent)

Asbestos Continues to Reduce Potential Years of Life

Asbestos exposure continues to have high rates of death in the US. Potential years of lost life continue to be at epidemic proportions. The US CDC reports that premature mortality as a result of asbestos related disease continues to be at all time highs. Asbestos is still not banned in the US

CMS to Mandate Use of WCIO Reporting Codes

In a telephone conference on December 12, 2008, CMS indicated that it will require the Workers Compensation Insurance Organizations reporting codes under the mandatory reporting procedures.

Part of Body

Nature of Injury

Cause of Injury

An explanation of the codes is available at on the WICO website.

Medicare Secondary Payer Mandatory Reporting

Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (P.L. 110-173), adds new mandatory reporting requirements for group health plan (GHP) arrangements and for liability insurance (including self-insurance), no-fault insurance, and workers' compensation.  See 42 U.S.C. 1395y(b)(7) & (8). 

Medical Costs Soar in Workers' Compensation

The cost of medical care has increased tremendously according to a recently issued  report. The NCCI (National Council on Compensation Insurance Inc.) reports an increase in medical costs from 40% in the early 1980s to almost 60% currently.

NCCI reports that the increase appears to be national, "....Furthermore, although there are differences in the medical share by state, the change in the relative mix of states has had very little impact on the estimated countrywide share of medical and indemnity benefits."

The national workers' compensation medical delivery system has now become a focus of attention in light of the prospects of an overhaul of national health care system as medical costs continue to put American businesses at a economic disadvantage with foreign competitors. James Kvaal, in his article, "The Economic Imperative for Health Reform," highlights that "...ever rising medical costs are threatening to drive an unsustainable explosion in the national debt." Higher insurance premiums result in lower wages or lack of medical coverage all together and the loss of preventive care.

The costly and inadequate workers' compensation medical delivery system provides a fragmented approach to medical care. The system's focus should treat current medical conditions and provide for preventive care. The administrative costs savings in providing global coverage will translate into reduced delivery costs and a healthier work force. Some of the extra savings could be well spent on much needed medical research to avoid the need for costly medical care.