Allegations of fraudulent practices in X-ray screenings help defendants, insurers

A dramatic decline in the number of silica cases along with allegations of widespread diagnosis fraud helped buoy insurer and company defendants' spirits in the past few months.

Mark Behrens, a Washington attorney who coordinates the pro-defendant Coalition for Litigation Justice Inc., conducted a survey of six defendant companies and found on average a dip of nearly 80 percent in the number of cases in 2004 compared to the previous year.

“The silica litigation environment has improved, in part, because the media was made aware of–and reported on–silica litigation abuses early on,” Mr. Behrens said. “But the litigation has not ended. It would be a mistake for anyone to declare victory at this point and walk away.”

Mr. Behrens said the six companies he surveyed covered a wide spectrum of defendants and would only agree to share the case figures if their names were not released.

As if to underscore that point that victory is not at hand, the numbers for the first three or four months of this year on a pro-rated basis show a more mixed picture with some increases but mostly a flattening.

Houston-based attorney Lance Lubel, who served as lead plaintiff counsel in the largest reported jury award in Texas for silicosis, puts the sharp decline in case numbers in a different light.

He noted that the impending prospect of tort reform in Mississippi and Texas in 2003 most likely spurred a rush to the courthouse for claimants. “This is a normal occurrence whenever there is this kind of tort reform pending,” he said.

And it really doesn't bother him all that much. “Any plaintiffs' firm would rather have 30 or so solid-10 cases than a whole bunch of threes,” he said, describing cases with the best facts to support plaintiffs' cases as “solid 10s.”

But while the number of cases declined, the number of entities named as silica defendants grew to 650 from 50 classes of businesses, according to a study published last month by General Reinsurance Corp., titled “Shifting Sands–Recent Silica Developments.” The study notes that power tool component manufacturers and jewelry manufacturers are among the new classes impacted by silica litigation. For a prior study published in October 2003, Gen Re had searched through an online database of North American manufacturers to find 422 companies involved with the manufacture or distribution of silica products.

The defendant class also enjoyed some success in the courts.

In November of last year, the Texas Supreme Court Multidistrict Litigation (MDL) panel ordered pre-trial consolidation of 71 cases filed in 55 district courts in 20 Texas counties. While six defendants argued for the consolidation and 11 opposed, it has been generally seen as a positive development. “In many cases, consolidation of cases can be viewed as favorable to defendants, as it allows more informed decisions on the part of an experienced jurist,” stated a silica litigation update published earlier this year by New York-based Guy Carpenter reinsurance brokers.

Another Texas Supreme Court ruling in Gomez v. Humble lessened the duty of silica suppliers to warn customers of possible danger of their product after a lower court said it was absolute, the Carpenter report noted.

But the biggest victory in the Texas court arena occurred when allegations of widespread fraud in the screening process threatened to derail many of the suits. At a three-day MDL hearing in February, Judge Janis Graham Jack, according to court transcripts, pointedly confronted many of the medical professionals on their diagnosis procedures.

One of the most explosive revelations that came of the hearing was that at least half of the approximately 10,000 plaintiffs in the silica MDL had filed asbestos claims previously.

What kicked off the fracas was deposition testimony in October last year from a Mobile, Ala., radiologist, George Martindale, that he unwittingly signed 3,617 diagnoses of silicosis under the impression that he merely was offering a second opinion.

For the defense, Dr. John Parker, a former fellow of pulmonary diseases at the National Institute of Occupational Safety and Health, testified, according to court transcripts, that he was stunned to hear a handful of doctors diagnosed nearly 10,000 workers with silicosis. “The lack of reader variability defies all statistical logic,” he said.

As a result, Judge Jack threw out the diagnoses and ordered the February hearing examining all the medical procedures in the case. That was followed by a March 14 hearing to determine whether the plaintiffs' law firm in the MDL should be sanctioned. A decision is expected next month.

Court transcripts indicate the depth of Ms. Jack's ire at both the lawyers and the doctors. According to the transcripts, she said, “I would probably sanction the doctors, and then sanction all the plaintiffs' lawyers to go to those doctors for the rest of their lives themselves.”

Mr. Lubel said he was appalled at the behavior of his fellow plaintiffs' attorneys in that instant and said it would create a new mountain of skepticism for the lawyers in future cases when they face new judges and juries.

And the charges have proved serious enough to cross into the criminal realm. A federal grand jury has convened in New York City looking into the allegations of diagnosis fraud.

Jackson, Miss., Attorney Danny Mulholland of the law firm of Forman, Perry, who represents roughly 30 defendants in Mississippi lawsuits, said that he was informed by an attorney for the N&M Radiology firm that it had received subpoenas in connection with the federal probe. Pascagoula, Miss.-based N&M employed Mr. Martindale and worked for plaintiffs' lawyers throughout the country pursuing asbestos claims.

Silica defense attorneys and insurers also have been active in the legislative field in both Washington and the state capitals.

Texas has become the latest state to take the medical criteria approach seeking to require claimants to show established medical proof before filing the claim all the while maintaining their right to sue forever if real symptoms. Last year, Ohio became the first state to approve such legislation followed by Florida and Georgia this year.

American Insurance Association Vice President Lynda Mounts expressed satisfaction with the outcome, noting that the industry only had targeted five states this year and would likely look at more next year.

But even activity in that handful of states may have, according to Mr. Behrens, caused the plaintiffs' attorneys “to see the writing on the wall and move to end mass screenings of silica cases.”

As is the case today, a great deal of the legislative action is in Washington where the on-again off-again asbestos trust fund now appears to be on again. But that is anything but a sure thing.

Judiciary Committee Chairman Senator Arlen Specter, R-Pa., recently warned that if the panel did not pass the bill by Memorial Day, no action would happen this year. (See page 15 for an update on the Washington battle over asbestos reform.)

The most recent draft of the trust fund bill would require more disclosure by asbestos and silica claimants regarding any recoveries in prior silica, asbestos or mixed dust claims.

While Mr. Behrens said that passage of the trust fund could lead to more asbestos lawyers turning to silica, the entire situation is too complex to say that was a given, he said.

To limit silica exposures, insurers increasingly are turning to exclusions, including one developed by the Jersey City, N.J.-based Insurance Services Office.

One trend that is troubling to plaintiffs' attorneys is the application of total pollution exclusions in commercial liability policies.

The Gen Re report, however, took note of a recent California Appellate Court ruling in Garamendi v. Golden Eagle Insurance Co. that found that silica dust came within the broad definition of pollutants under the exclusion. Plaintiffs' attorneys had argued the exclusion did not extend to product defects or failure to warn claims.

That decision also affirmed the notion that the presence of an asbestos exclusion did not mean a pollution exclusion could not apply to substances such as silica. The issue, however, may soon prove academic if the decision is appealed to the California Supreme Court. “It is also unknown if the high court would also view silica as a pollutant given its earlier decisions,” the report stated.

Silica is a ubiquitous mineral that is commonly used as industrial sand. The sand is harmful when blasted into tiny particles and inhaled by humans.

Regulation of the product started in the 1930s when silicosis was recognized as an industrial disease, and in 1971, federal regulations first set permissible exposure limits for those occupations exposed to silica.

For several years, silica was touted as the “next asbestos” in terms of lawsuit potential and the number of cases filed continued to grow as trial lawyers despaired of asbestos success for a number of reasons.

But while the numbers decreased last year, a trend is not made in one year. “If momentum is lost, or some courts adopt liberal rules that encourage the filing of claims, then the litigation could increase again,” Mr. Behrens said.

Caption for graphic:

Flag: Cases Tumble

The pro-defendant Coalition for Litigation Justice Inc. conducted a survey of six defendant companies and found, on average, a dip of nearly 80 percent in the number of silica cases in 2004 compared to the previous year.

Art Caption: (may change depending on art): Slipping Through Their Fingers? Insurers and defendants are hopeful that plaintiffs' attorneys are losing their grip on silica cases as claims trends begin to reverse and scrutiny of mass X-ray screenings increases.

Behrans quote: “The silica litigation environment has improved, in part, because the media was made aware of–and reported on–silica litigation abuses early on. But…it would be a mistake for anyone to declare victory at this point and walk away.”

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