CLI Editor’s Note: This story originally ran in The New York Law Journal on April 25.
The state’s largest medical malpractice carrier can require claimants to use its structured settlement brokers rather than their own, a commercial division judge in Buffalo has held.
Acting Supreme Court Justice Timothy Walker (See Profile) rejected claims of a Buffalo plaintiffs’ broker that Medical Liability Mutual Insurance Co. (MLMIC), by requiring claimant’s to exclusively use its designated brokers, is engaging in conduct that results in an unlawful restraint of trade.
Walker, the presiding justice of the commercial division in Erie County, suggested that the broker who brought action is mainly irritated that Medical Liability’s policy is costing him commissions, and said that a “competitor’s financial injury—such as loss of profits or commissions—is not a cognizable antitrust injury that can sustain a Donnelly Act claim.” He also said insurers can, as a negotiating tactic, refuse to do business with plaintiff brokers or plaintiffs who have their own broker.
Isaac v. Medical Liability Mutual Insurance Co., 2013-883, was started by Paul Isaac, an insurance agent and the owner of Paramount Settlement Planning Inc. Isaac designs and writes annuities for structured settlements and works with personal injury attorneys to prepare settlements.
Annuities are commonly purchased in cases where a claimant obtains a lump sum judgment and wants to avoid tax consequences by structuring the payments over a period of time.
Often, a broker for the claimant and one for the defendant or its insurer work out a structure and split the standard 4 percent commission. But Medical Liability requires claimants to exclusively use a handful of brokers in its stable, taking representatives of the plaintiff out of the picture and denying them a share of the commission, according to the lawsuit.
Isaac alleged that Medical Liability violated the Donnelly Act by excluding him from the short list of approved annuity brokers with which it does business. But Walker said the Donnelly Act requires a showing of a “reciprocal relationship of commitment between two or more legal or economic entities,” and does not cover unilateral conduct such as that alleged in this case.
Here, Walker said, Isaac alleged a conspiracy, but failed to provide any evidence that Medical Liability engaged in any improper scheme.
“[P]laintiffs’ allegations that claimants are ‘invariably forced at some point to deal with’MLMIC has nothing to do with anticompetitive conduct on the part of MLMIC, the use of a broker to structure a settlement, or an attempt to restrain trade,” Walker wrote. “Rather, that claimants must deal with MLMIC to resolve their claims results entirely from the defendant-healthcare provider’s choice of insurer.”
Walker also said Isaac’s allegation that Medical Liability’s policy harms claimants is too vague.
“MLMIC’s alleged insistence on using the broker defendants to place a structured settlement annuity does not, as plaintiffs claim, require that claimants forgo representation and advice altogether,” Walker wrote. “Indeed, claimants remain free to hire a representative…to provide advice.”
The judge said any harm to the claimants, “to the extent that it occurs at all,” takes place “within the market in which plaintiffs do not operate—the market for settling personal injury litigation,” and consequently the plaintiffs lack standing to assert any claim on behalf of the claimants.
Walker observed that the U.S. Court of Appeals for the Ninth Circuit, in a virtually identical case, “concluded that an insurer’s exclusion of a particular plaintiffs’ broker does not constitute an antitrust injury in the broker’s market based on alleged harm to tort plaintiffs” (see Legal Econ. Evaluations Inc. v. Metropolitan Life Insurance Co., 39 F. 3d 951 (1994)).
“Plaintiffs’ focus on the alleged harm to claimants merely distracts from their true grievance: lost commissions,” Walker wrote.
Buffalo attorney J. Michael Hayes, who represents Isaacs and his company, said he will appeal to the Appellate Division, Fourth Department. Hayes said the ruling could have disastrous consequences for claimants and their brokers.
“Best case scenario, you have the status quo and all plaintiffs’ brokers continued to be barred from dealing with MLMIC, which now has carte blanche to do whatever it wants to do,” Hayes said. “Worst case scenario, every insurance company in all fields apparently has the right to require that you only use their defense broker and the entire plaintiff broker business is blackballed in the state of New York. I think it is unconscionable.”
Medical Liability was represented by litigation partner Ronald Blum and associate Jeremy Lacks of Manatt, Phelps & Phillips in Manhattan. Blum declined comment.