Your Patient is a Criminal. Carrier Denies Payment. Now What?

Most doctors have taken care of patients who were medically impacted by their illegal act. Some of these patients actually have third party insurance. I know, you’re skeptical. OK, how about a rock star who overdoses? Maybe he’s not come to your ER. But, he came to someone’s ER.

Dzokhar Tsarneav, another criminal, was transported to a hospital to be treated – probably at great cost – for injuries sustained in a gun battle with the police. This issue brings into focus the problems physicians face in getting an insurer to cover patients for what they brought on themselves through illegal acts.

The basic rule of insurance is carriers will not cover an insured for intentional illegal acts. Insurers will cover patients for harm resulting from their illegal act IF that crime was not intended. Therefore, if a driver is injured while trying to run down his neighbor that driver will not be covered. But if the driver drove while drunk – itself an illegal act but without intention to commit a crime – he would be covered for injuries he sustained when he crashes into a lamppost.

The “accidental” aspect of the injury as a requirement would therefore mean that an accidental heroin overdose or being shot by a cop while robbing a bank – neither of which the insured intended to happen – would be covered for medical care. These would be treated just as if the insured had accidentally overdosed on a legal drug or had been shot while an innocent bystander at the robbery.

Of course, that is simply the basic rule – the rule that applies if the policy is otherwise silent…

…and when have you known any insurer to be silent on the issue of limiting payment?

Insurers therefore include provisions called “illegal acts” or “criminal acts” exclusions.

Insurers argue that paying for the care of someone who was only injured through their own illegal conduct rewards them. They argue doing so is against public policy.

The public policy analysis must address more than the insurer’s interest. An insured who is denied benefits is actually tossed off onto the taxpayers. They get hit via uncompensated care funds or Medicaid if the patient cannot pay out of pocket. In other words, they do get covered for what they brought on themselves – just not by the insurer who collected years of premiums…

Without wasting our time on teeth-gnashing at the insurance industry for doing what the insurance industry does, let’s look at how the system works.

The first issue is the rather Clintonian one of what exactly “illegal” or “crime” actually means.

Insureds denied coverage need to prove that the denial of benefits by the insurer was “arbitrary and capricious.” Insureds denied coverage under illegality exceptions will therefore claim that these exclusions should properly apply only to crimes of intent and certainly not to traffic infractions or misdemeanors.

Felonies would clearly be covered. Therefore, the above example of the drunk driver being covered reverses – he will NOT be covered because he was injured while committing the intrinsic felony of driving while intoxicated.

The role of misdemeanors and traffic infractions is far less clear, but is increasingly hedged against the insureds by the courts.

Consider the 2003 Celardo case.

The insured crossed a double yellow line while driving, lost control and hit a tree and was injured.

In refusing to accept his argument that “illegal” in his policy meant ‘criminal” and that he had merely engaged in a traffic infraction, the Second Circuit held that “illegal” simply means “contrary to or violating a law or rule or regulation or something else (as an established custom) having the force of law.” So the insurer COULD refuse to pay for the driver’s injuries based on the illegality of having crossed the double yellow line.

The Second Circuit covers Connecticut and New York – both homes of major insurers. Perhaps that’s a coincidence.

Courts have also held that an actual charging, let alone an actual conviction, is not required because there might be many reasons that a District Attorney might not charge someone.

Therefore, a carrier might deny payment for treatment of injuries in the ER after a car wreck if the patient has an elevated blood alcohol level. It matters not that the local DA, who has a limited budget, declined to prosecute that person because there was no property damage.

Most policies close this door and specifically state that injury during the “commission” of an illegal act is enough for exclusion of coverage.

The next issue for reimbursement is whether the illegal act itself was actually the cause of the injury.

Let’s go back to the Celardo case on this point.

There, the “patient” committed more than one criminal act. He was also driving an unregistered car with dealer plates that he pilfered from his employer. That act, while illegal, did not cause his injuries. If that were his only act, the carrier would have had to pay. But, the court upheld the denial of benefits on the basis of the infraction he committed while actually driving that caused him to lose control of the car.

Parsing out causation is one issue where courts do tend to hold the insurer’s feet to the fire. They require an actual finding of fact in a true “but for” proximate cause analysis rather than just a plan administrator’s inference that Event A may have contributed to Event B. Huh? An example will illustrate.

In 2006, the Third Circuit (New Jersey, Delaware, Pennsylvania) required that the insurer actually furnish proof on their claim that the injuries in a motorcycle accident were due to the driver’s intoxication. They held that the carrier’s statement that “it was reasonable to conclude” that the DUI aspect “contributed to” the accident, and so to the injuries, was not enough.

Insurers are also dodging this requirement by now drafting around a causation requirement by stating that coverage is excluded if the injuries occurred “while” an illegal act was being committed.

In other words, if you are doctor treating a patient who was injured when they were involved in any activity that lies outside the sanction of the law, there is a good chance that their insurer will refuse to pay you.

The most common scenario triggering potential non-payment involves patients injured in act associated with alcohol or substance abuse. But, there’s encouraging news.

First, the bad news. 27 states still have laws on the books that expressly permit insurers to exclude payment for both diagnostic and treatment services for conditions related to alcohol or drugs. Other states are silent, which still leaves the option to contractually deny coverage open to insurers.

Given the widespread problem of drug and alcohol addiction and that none of the states which have an intoxication exclusion in their insurance codes have a public financing system to bear those costs, there is massive transfer of financial responsibility from the excluding insurers to other third party payors and to hospitals.

The financial repercussions to a hospital can be devastating, as in the 2003 Bishop case in which the Second Circuit (yes, that Circuit again…) upheld an intoxication exclusion in a policy bought in a state without a specific law on the subject. This left the hospital with a $750,000 unpaid bill. Hospital associations clearly oppose these laws.

Physicians can also impact this problem.

A decade ago 42 states and the District of Columbia explicitly allowed such exclusions and only Iowa and South Dakota expressly barred them. The current national map shows substantial positive change, with 14 states (CA, CT, CO, IL, IN, IA, ME, MD, NV, NC, OR, RI, SD, WA) and the District of Columbia now barring these exclusions.

If you do not live in one of these jurisdictions this is an issue that you should press your state medical association to address. State legislatures are open to ideas that don’t dump on taxpayers or unnecessarily increase Medicaid rolls.

If you are a member of the American College of Surgeons, The American College of Emergency Physicians or the American Public Health Association, these organizations also oppose these exclusions. They can provide support on this issue.

What to do in the meantime.

Some doctors believe they shouldn’t buy the bullet for a gun pointed at their head. Why give the carrier the information it needs to turn down a claim. Why even draw blood alcohol levels?

First, it might not matter. A record may already have been created by EMS or by triage intake, records which will already have memorialized a likely heroin overdose or alcohol on the patient’s breath or a gunshot wound after a shootout or burns after a meth lab explosion.

Deliberately under-ordering and under-documenting, may increase risk of liability for not treating the patient adequately and also not having a defensible chart if later sued.

Doctors should process that patient as they do patients who are known to be uninsured. It’s probably a bad idea to re-write the patient’s history in order to try to get paid.

Remember – nothing that you will make on an individual case, and certainly no fee difference between a private insurer and Medicaid, will compensate you from the costs of being sued for malpractice without a defensible record.

In summary: For years, there was an increasing trend among courts to allow insurers wide latitude in denying payment for injuries when the insured was engaging in illegal conduct, so that even actions that are relatively minor but still illegal can be a basis to deny payment. However, there is also a legislative trend to reversing the ability of insurers to deny payment merely because intoxication was involved in the injuries. Physicians should be active in furthering this change.