Allegations of fraudulent practices in X-ray screenings helpdefendants, insurers

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A dramatic decline in the number of silica cases along withallegations of widespread diagnosis fraud helped buoy insurer andcompany defendants' spirits in the past few months.

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

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

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

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

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

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

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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 bunchof threes,” he said, describing cases with the best facts tosupport plaintiffs' cases as “solid 10s.”

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But while the number of cases declined, the number of entitiesnamed as silica defendants grew to 650 from 50 classes ofbusinesses, according to a study published last month by GeneralReinsurance Corp., titled “Shifting Sands–Recent SilicaDevelopments.” The study notes that power tool componentmanufacturers and jewelry manufacturers are among the new classesimpacted by silica litigation. For a prior study published inOctober 2003, Gen Re had searched through an online database ofNorth American manufacturers to find 422 companies involved withthe manufacture or distribution of silica products.

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The defendant class also enjoyed some success in the courts.

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

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

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But the biggest victory in the Texas court arena occurred whenallegations of widespread fraud in the screening process threatenedto derail many of the suits. At a three-day MDL hearing inFebruary, Judge Janis Graham Jack, according to court transcripts,pointedly confronted many of the medical professionals on theirdiagnosis procedures.

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

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

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For the defense, Dr. John Parker, a former fellow of pulmonarydiseases at the National Institute of Occupational Safety andHealth, testified, according to court transcripts, that he wasstunned to hear a handful of doctors diagnosed nearly 10,000workers with silicosis. “The lack of reader variability defies allstatistical logic,” he said.

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

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Court transcripts indicate the depth of Ms. Jack's ire at boththe lawyers and the doctors. According to the transcripts, shesaid, “I would probably sanction the doctors, and then sanction allthe plaintiffs' lawyers to go to those doctors for the rest oftheir lives themselves.”

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Mr. Lubel said he was appalled at the behavior of his fellowplaintiffs' attorneys in that instant and said it would create anew mountain of skepticism for the lawyers in future cases whenthey face new judges and juries.

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

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

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

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Texas has become the latest state to take the medical criteriaapproach seeking to require claimants to show established medicalproof before filing the claim all the while maintaining their rightto sue forever if real symptoms. Last year, Ohio became the firststate to approve such legislation followed by Florida and Georgiathis year.

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American Insurance Association Vice President Lynda Mountsexpressed satisfaction with the outcome, noting that the industryonly had targeted five states this year and would likely look atmore next year.

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

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

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

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

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

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To limit silica exposures, insurers increasingly are turning toexclusions, including one developed by the Jersey City, N.J.-basedInsurance Services Office.

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One trend that is troubling to plaintiffs' attorneys is theapplication of total pollution exclusions in commercial liabilitypolicies.

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

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That decision also affirmed the notion that the presence of anasbestos exclusion did not mean a pollution exclusion could notapply to substances such as silica. The issue, however, may soonprove academic if the decision is appealed to the CaliforniaSupreme Court. “It is also unknown if the high court would alsoview silica as a pollutant given its earlier decisions,” the reportstated.

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Silica is a ubiquitous mineral that is commonly used asindustrial sand. The sand is harmful when blasted into tinyparticles and inhaled by humans.

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Regulation of the product started in the 1930s when silicosiswas recognized as an industrial disease, and in 1971, federalregulations first set permissible exposure limits for thoseoccupations exposed to silica.

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

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But while the numbers decreased last year, a trend is not madein one year. “If momentum is lost, or some courts adopt liberalrules that encourage the filing of claims, then the litigationcould increase again,” Mr. Behrens said.

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Caption for graphic:

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Flag: Cases Tumble

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

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Art Caption: (may change depending on art): SlippingThrough Their Fingers? Insurers and defendants are hopefulthat plaintiffs' attorneys are losing their grip on silica cases asclaims trends begin to reverse and scrutiny of mass X-rayscreenings increases.

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

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