When Primary Insurance Isn’t Enough...

Back in law school, one of my professors told a story about a young family-law attorney who agreed to take a catastrophic car accident case involving a big rig. The attorney wasn’t particularly familiar with personal injury law, but the client was a friend of the family and the lawyer wanted to help. It quickly became apparent to the lawyer that the victim’s injuries were severe and that the insurance policy carried by the big rig wasn’t going to come close to covering the hospital bills. Hoping to get what help the policy could provide, the attorney was prepared to settle the case for the value of the truck policy when a friend mentioned that big rig outfits usually carried two different policies, one for the cab and one for the trailer. The lawyer had been about to settle the case for the value of the much smaller cab policy.

Policy Stacking

While mistakes like these are tragically common among lawyers who practice outside of their areas of expertise, that isn’t the moral of this story. Rather, I’d like to draw your attention to the concept of policy stacking. Policy stacking is the practice of collecting from more than one insurance policy for the same underlying claim. The policies in question might be carried by the same company or by different companies, and there might be two or two-hundred (or more as the case may be). Before we get into the details of how this might work in different situations, let’s be clear about one thing; nowhere is the law generally willing to give a person a windfall. In other words, while there are many situations in which an injured party may be able to collect from multiple insurance policies, almost always the total collection is limited by the total amount of damages. A defendant, with rare exception, cannot get paid twice for the same injury.
Umbrella Insurance

Policy stacking can mean a couple of different things. On the one hand, multiple primary policies might be implicated by a single incident. On the other, there might be a conflict between a primary policy, like an auto policy, and an umbrella policy such as typical homeowner’s insurance. In either case the question becomes, which policy or policies are responsible for the loss. To illustrate, let’s look at a standard auto accident situation. In our example situation, Driver B hits Driver A and is liable for Driver A’s injuries. Driver B has a state minimum car insurance policy which will pay a maximum of $15,000. Unfortunately, Driver A’s injuries come out at $100,000 leaving $85,000 in uncovered damages. In this case, the primary policy, the auto insurance, has been exhausted and any secondary coverage must be addressed. Fortunately for Driver A, Driver B carries a homeowner’s umbrella policy with a one million dollar coverage limit. This policy will cover any incident for which Driver B becomes liable, but only after primary insurance has been exhausted. Has this coverage been triggered?

Med-Pay Provisions

Med pay clauses are provisions in an insurance policy that cover medical expenses, up to some given limit; usually regardless of fault. Let’s assume that Driver A had a $5000 med-pay provision in their policy. Even though Driver B was at fault in the accident, Driver A can still collect this $5000 from their own policy. After this $5000 is paid out, can Driver A now seek coverage from Driver B’s umbrella policy?

Uninsured and Underinsured Coverage

Maybe, but there still might be more to the puzzle. I’ve written about uninsured and underinsured coverage in the past, but it’s implicated again here. Let’s assume that Driver A elected optional uninsured coverage in the amount of $30,000 when they purchased their own policy. This coverage will step in and compensate them for losses not wholly covered by another driver who was at fault in an accident. However, it only partially stacks; Driver B’s $15,000 in coverage will be deducted against it; meaning that Driver A’s uninsured coverage will only pay an additional $15,000 in our example.

So Where Do We Stand?

Based on the example we’ve been working through, Driver B’s primary auto policy will pay $15,000, Driver A’s primary auto policy will pay $20,000 ($5,000 med-pay and $15,000 UIM) leaving $65,000 in uncollected damages to Driver A. Assuming no other policies are implicated, this is where Driver B’s umbrella policy will finally step in and take over coverage; filling the gap left by the other layers of insurance.


As this example should make clear, insurance stacking can potentially become very complex. In large commercial policies, the situation gets even worse. Policy stacking issues went all the way to the California Supreme Court back in 2012 and look set to return there based on a 2013 State Appellate court ruling. While commercial coverage is beyond the scope of this article, it’s important to recognize that the question of which, of many, possible insurance policies might be liable for a given injury isn’t necessarily an easy one to answer; and, as with many other aspects of personal injury law, experience matters when it comes to finding coverage for severely injured accident victims.

Maximums and Minimums: who chooses the right criminal sentence?

Allen Alleyne and an accomplice robbed the manager of a convenience store as the manager was leaving to make a bank deposit. Both Alleyne and his accomplice carried guns. After tricking the manager into stopping his car, Alleyne’s accomplice approached the manager, pressed a gun to his head, and demanded the cash the manager was carrying. The manager complied and both suspects fled the scene. Alleyne was later arrested and charged with two crimes, one for the robbery itself and another for using a firearm during a robbery. At trial the jury was asked to decide two critical questions, did Alleyne carry or use a weapon during the robbery and did he discharge that weapon. The jury found beyond a reasonable doubt that he had carried or used a weapon during the robbery, but made no determination as to the second question.

Under applicable federal law, the sentence for robbery changes when a firearm enters the picture. For a carrying a gun, a defendant faces 5 years, for brandishing a gun, 7 years, and longer still for actually discharging a gun. During Alleyne’s sentencing hearing the judge decided, on a preponderance of the evidence (meaning more than 50% likely), that Alleyne had actually brandished his weapon and accordingly imposed the 7 year enhanced sentence. Alleyne appealed, arguing that the sentence violated his Sixth Amendment rights because this fact had never been properly submitted to the jury. The case eventually wound its way to the U.S. Supreme Court – but let’s backup for a second.

What are sentence enhancements?

While every state has its own set of criminal laws, as does the Federal Government, most systems incorporate one or both of two types of statutorily mandated sentencing guidelines; mandatory minimums, or statutory maximums. The distinction between the two can sometimes get confusing so we’ll consider each separately.

Mandatory Minimums

Mandatory minimums refer to the smallest (least harsh) penalty a judge is allowed to apply to a given class of criminal defendant. When presented with a case in which the facts match the conditions established by the applicable law, a judge does not have the discretion to hand down a sentence lower than the minimum prescribed by the legislature; use of a deadly weapon, rape or child abuse, targeting an elected official, racially or religiously motivate crimes, and many other things can often lead to mandatory minimum sentences. Where one applies, a lesser sentence cannot be imposed, no matter how appropriate it might seem in an individual case.

Statutory Maximums

Statutory maximums are just the opposite (almost). Here, the legislature has defined the maximum penalty that a given class of defendants can face. A judge presiding over an applicable case does not have the discretion to impose a harsher sentence than the cap established by the legislature; no matter the nature of the particular defendant in question. Many crimes have caps on the punishment that can be applied. However, there are often ranges provided depending on the facts. For example, using a fire arm during a robbery can increase a defendant’s exposure by several years over a similar defendant who committed an identical robbery without a firearm. Judges do not have to impose maximum sentences, but cannot exceed them. The range of possible sentences falling between any applicable mandatory minimum and statutory maximum equals the defendant’s potential exposure.

Who decides?

Often it is the judge who decides a specific penalty. Get picked up for insider trading under sympathetic circumstances and you might find a judge willing to “go easy” on you. Hassle the judge all the way through a trial, and you’re more likely to find yourself facing a harsher sentence. However, things become somewhat less clear, and, until Alleyne, less constitutionally certain, when a mandatory minimum or statutory maximum sentence range is triggered. Usually these conditions result from the specific facts of the case; did the defendant carry a gun, how old was the child, how much money was involved, and the like. Is a judge allowed to determine the existence or extent of such facts during the sentencing phase of a trial, or must the jury find the existence of these facts beyond a reasonable doubt?

Enter the Supreme Court

In 2000, the Supreme Court weighed in; declaring that any fact which raised a statutory maximum must be decided by a jury beyond reasonable doubt but that judges were free to determine facts triggering a mandatory minimum based only on a preponderance of the evidence. For a decade this inconsistency in the law stood strong against numerous attacks by scholars and repeated attempts by the defendant’s bar to have the ruling overturned. Then came Alleyne; based on facts very similar to those in the Court’s earlier decision, and brought on a challenge to the exact same Federal law, both the district court and the Fourth Circuit refused to amend Alleyne’s sentence; standing, so they thought, on strong Supreme Court guidance.

Overruled!

To many people’s great surprise, the Court changed its mind. The majority in Alleyne held that statutory maximums and mandatory minimums weren’t different after all; facts triggering both types of sentencing guidelines must be decided by a jury beyond a reasonable doubt. It took a few years, but the right decision was ultimately made. Thanks to Alleyne, the full protection of the Sixth Amendment’s trial by jury requirement is now available to criminal defendants facing a legislatively proscribed sentencing enhancement under either State or Federal law.

New Ways to Prove Psych Injuries – DSM V

"Me thinks all the world mad but me and thee. And sometimes I wonder about thee." – Unknown Quaker Saying

While sometimes attributed to Robert Owen, a Welsh born social reformer of the late 18th century with a fascinating history of his own, the origins of this quote are not know with certainty so far as my limited research could discover. Nonetheless, the words, and a host of phrases of similar meaning, have a common ring and are often used as a euphemism for the fact that state of mind can be a very personal matter of perception. What to one individual seems completely crazy, may to another appear merely common practice. Most of us recognize this problem, but for the legal profession, leaving things lie with such loose definitions is impractical to say the least. Whether the stakes involve the capacity of a defendant to stand trial, the value of injuries to an abused child, or the capacity of testator to distribute of their worldly possessions by will; questions of the mind abound in the law and most, if not all, require some precision in definition.

For many years, the ability of an injured plaintiff to claim damages for mental injury related to a tort were severely limited by the understanding that traumatic mental harm, usually referred to as some variation of Post-Traumatic Stress Disorder (PTSD), required some personal exposure to the stressor in question. With the publishing of the first update to the Diagnostic and Statistical Manual (now DSM V) to come from the American Psychiatric Association in almost twenty years, proving real psychological damage to a tort victim may have just become a little more practical.

A decade of research

The DSM V, which was released in May of 2013, contains a number of dramatic changes over prior editions. I am not a psychologist or psychiatrist and so I usually leave these matters to the experts, but when changes to the most reputable guide to mental health diagnostics in existence possibly alters the nature of legal cases, I pay attention. Premised on many years of research by qualified experts in a wide range of fields, the APA’s DSM V serves as one of the definitive go-to sources for the details relating to mental health diagnoses. New in this edition is an added standard against which real mental trauma can be assessed. In prior editions of the DSM, and thus in much of the legal tradition which flows from the publication, PTSD was only recognized as a result of direct personal exposure to a traumatic stressor. New in version five is an added possible causal factor; indirect exposure to a traumatic stressor as a result of learning of the direct exposure of a close relative. In other words, in version four of the DSM; you had to be there to understand. In version five, learning that your child was there might be proof enough of your legitimate mental injury.

What this means for plaintiffs

For injured plaintiffs suing for mental health injuries, the standard of proof has potentially changed dramatically. We all recognize that a significant amount of damaging stress can result from learning that, for example, a child has been repeatedly abused at school, or that a loved one was brutally murdered in their nearby apartment. However, the legal profession has not always accepted these factors as sufficient evidence of actual mental harm. The DSM V stands to change all this. While it is not entirely clear how the law will adapt, it seems likely that many legitimately injured plaintiffs will now have at least some room to prove their damages using the new factors of the DSM V. Certainly, arguments can be made.

Not without controversy

Despite the potential good that can come from the new definition, there are voices of opposition. Some have taken the publication of a new DSM version as an opportunity to attempt to shout down the entire profession. Others have legitimate critiques of the both the association and the newest set of standards. In the end, however, most of these voices echo a deep rooted tradition of looking down on, shaming, and even discriminating against mental illness and injury. Some of this controversy will undoubtedly spill over into the legal profession in the form of defendant’s attorneys who may use such critiques to undermine the validity of damage claims. However, it seems likely that the APA, which has been steadfastly defending the legitimacy of the new definitions and the process by which they were formed, will ultimately prevail based on the strength of the underlying science and at the end of the day injured plaintiffs will have that much better a shot at being made whole after an incident.

Is a Settlement Trust Right for You?

Most people understand that when you are injured in an accident of some kind, you may have legal options for recovering all or part of your costs from someone else. For example, if someone hits you with their car while driving recklessly, there is a good chance that you’ll get a settlement from them -- or more typically from their insurance company, or that you’ll go to court and win an award against them for your damages. However, what exactly that award or settlement looks like in practice is less well understood. Winning an award in court is only part of the process of actually getting reimbursed for your injuries; you still have to collect the money you’re owed. I’ve written before about some of the reasons that some good cases just can’t be “won” in a practical sense because there simply isn’t any option for ultimately collection on your award. In this article I want to talk about some of the reasons why you might not want to take a big check from your defendant, and what you can do instead under certain circumstances.

Annuities

Put simply an annuity is merely a series of fixed payments stretching into the future. Sometimes defendants who are held liable by the court, or who voluntarily settle a case, just don’t have enough resources to pay you outright. In these situations, a defendant might offer to make payments to you, like payments on a house, until their obligation is “paid off”. There are lots of ways these kinds of structures can be set up, but essentially you get your money in regular chunks; not all at once.

Trusts

In some situations, your defendant might have enough cash on hand to pay your claim outright, such as an insurance company, but it might be in your best interest to take payments on the award rather than a large lump sum. Sometimes this is because accepting a large one-time payment might have adverse tax consequences. In other circumstances, a plaintiff might not be competent to handle a large lump payment; such as for very young children or disabled victims. In these cases, a trust can be created to handle the assets while still ensuring that the money, or the benefits of the trust, ultimately goes to the intended plaintiff; usually in the form of periodic payments. There are a number of different types of trusts, some of which have wide room to design the specifics to match a given situation, others of which are closely regulated by state or Federal law.

Voluntary Settlement Trusts
In some situations, the successful plaintiff might not want, or be able to, handle a single large payment. Children, for example, probably don’t have the experience or resources necessary to manage several hundred thousand dollars in settlement money. Even for adults, some people just aren’t great at managing their money and would prefer a stress free regular payment instead of the hassle of large asset management choices. In these circumstances, trusts can be created, with professional asset managers, to hold the settlement for the benefit of the injured plaintiff. These trusts are usually managed with an eye towards maximizing their value and the money is often invested at a profit; the trust ultimately becomes worth more than the original settlement. Payment of benefits can be structured in a number of different ways to meet a wide variety of objectives. For example, payments could be made to a child’s guardian until the child reaches 18 (or 21 or 35) at which time the balance of the trust might be paid out in full. Many other options exist.

Special Needs Trust
In some cases, an injured accident victim was previously eligible for public services such as Medicaid or Medicare and doesn’t want to lose that eligibility as a result of coming into a large sum of money. There are a number of legitimate reasons for this concern such as the long-term sustainability of care. Whatever the reason, the law provides for trusts to be created for just this situation. Though such trusts are highly regulated, and the benefits can be paid out only under certain circumstances; the assets of such trusts will not be counted against a person with regard to public benefits eligibility. The one major requirement is that the beneficiary be disabled.

Medicare Set Aside
A variation of the special needs trusts, Medicare Set Asides are designed to help keep an individual eligible for Medicare under certain circumstances. These trusts are complex and governed by an interlocking series of both Federal and State laws, but they are sometimes the best way to preserve settlement resources for certain classes of victims.

You need a lawyer

Trusts are not to be taken lightly. They involve complex financial decisions informed by even more complex legal questions. Done improperly, trusts have the potential to dilute assets dramatically. If you think that a trust of one kind or another might benefit your situation, you absolutely should speak to a qualified attorney about your case before making any final decisions. There are pros and cons to each type of settlement, from a lump-sum payment to a trust arrangement, and you’ll want to make sure that you’re fully informed about all of your options.