099: Are You Sure You’re Insured?

Stella Case No. 099, Originally Published: 21 December 2005

Do you have health insurance? Are you sure they’re really insuring you from a huge loss? Maybe, maybe not.

After a collision between her minivan and a tractor-trailer five years ago, Debbie Shank now spends her days in a wheelchair in a nursing home, able to move only one arm and two fingers. Brain damage and memory loss has drained most meaningful content from her conversations with her husband of 30 years.

“She’ll ask about the boys, she’ll ask about the cat,” says Jim Shank. “Whenever I’m there, she thinks it must be a mealtime. We don’t really hold a conversation.”

Her 17-year-old son is in the Army, which she knows, but he’s scheduled for deployment to Iraq next year, which she doesn’t know. She also doesn’t know that there is a war in Iraq.

To help compensate for the terrible injuries she received in the accident, Shank and her husband sued G.E.M. Trucking and James David Shivers, the driver who hit her, in U.S. District Court in 2000. According to that lawsuit, Shank suffered damage to her brain stem and other injuries, and was in a coma after Shivers’ tractor-trailer struck her near Cape Girardeau, Mo.

The lawsuit was settled for $900,000; after attorneys’ fees and other costs, Shank’s share was less than half — just $417,477. The court set up an irrevocable trust for the money so it could only be used to pay for her long term care, and the money was sent directly there. Her husband received just over $119,000, presumably for his loss of consortium.

Before the accident, Shank had worked the night shift stocking shelves at a Missouri Walmart so she could spend her days with her sons so she could be a “better mother.” “It’s all she ever wanted to be,” her husband says. Luckily, she had gotten health insurance through her employer. It paid for her huge medical bills after the accident.

But because she later got a settlement from her lawsuit, Walmart’s health plan administrators demanded she repay the money her health insurance paid toward her care. To press the case, the retail giant’s health plan is suing the Shanks in U.S. District Court in St. Louis. The lawsuit, filed by the Administrative Committee of the Walmart Stores Inc. Associates’ Health and Welfare Plan, claims that her total medical expenses exceed $469,216, and it demands that amount in return. Plus court costs to get it. Plus interest.

But wait; while Shank’s settlement was $900,000, she only actually got $417,477. Shouldn’t that be the limit? No, the company says: it wants all $469,216, as spelled out in its policy. So if the company wins, the amount in Shank’s trust will not be enough; the family could conceivably have to come up with nearly $52,000 more than what they won in court.

Jim Shank had anticipated and feared just such an outcome. He received a letter two weeks after the accident that, he recalls, said the insurance would not cover his wife’s care unless he signed over their right to lawsuit proceeds. Not surprisingly, he signed it so his wife could get the care she desperately needed to survive.

Lawyers familiar with this type of suit says it’s not really uncommon. In fact, according to the insurer’s lawsuit, the terms are explicit in Walmart’s health plan, which is to be reimbursed first from lawsuit proceeds up to 100 percent of the medical costs.

According to the lawsuit, the health plan also places the burden of attorney’s fees and court costs on the employee. So the health plan also wants the Shanks to pay for the costs the health plan is incurring to sue them.

Maurice Graham, one of the lawyers for Debbie Shank, says only part of the money she received was used to pay medical bills. Since the settlement money was placed in a trust created by the federal court, he says, it never came into the couple’s hands and is supposed to be used only for her ongoing support.

Marty Hires, a spokesman for Walmart, says filing the lawsuit was just a way for the company to preserve its legal options and that the health plan has not decided whether to pursue the case.

Regardless, the lawsuit left Shank’s lawyer, Graham, incredulous. “I can’t believe that they’ve done this,” he said. “The cost to care for her in the future is going to be literally millions. She is confined to a nursing home, has a normal life expectancy, and requires full-time care.”

If the insurance company does pursue the case and succeeds, Debbie Shank’s already dire circumstances likely would turn even more bleak. Jim Shank says she’d probably lose her caretaker and the wheelchair-accessible van they bought for her. Walmart spokesman Marty Hires said the company isn’t sure whether it will actually pursue the lawsuit now that it’s been filed; it was filed before the statute of limitations expired to “preserve our options,” he said. “This is kind of a standard procedure.” He refused further comment, citing federal health privacy laws.

How comforting that must be for Jim Shank to know Walmart is only “preserving its options.” He also fears the prediction made years earlier by a lawyer who specializes in elder care might come true: that if the money runs out, Shank might have to divorce his wife so that she can become eligible for Medicaid.

Lawyers familiar with insurance law say such measures are not unusual for health plans that, like Walmart’s, are self-financed — that is, funded by employers and/or employee unions — to recoup medical expenses. “Walmart has certainly been one of the more aggressive and assertive in doing this,” says Sheldon Weinhaus, a St. Louis lawyer. In his opinion, courts are starting to “recognize the unfairness of this, and they’re looking for reasons to stop Walmart and others from doing this.”

On the other side of the coin is attorney Jim Singer, who has faced Weinhaus in court over such issues. He says such lawsuits helps employers from having to cut benefits or ask workers to contribute more. “You need to put the money back in the trust so it will be available for other people,” he said. But that generally only works for self-financed insurers; in most cases state law prohibits regular insurance companies from attacking such settlements.

But don’t make your mind up yet: this is far from a cut and dried issue. The question becomes, was Mrs. Shank’s lawsuit settlement in compensation for her past medical bills, or for her future care? It’s an important question, since if it was for her medical bills, she shouldn’t be able to collect twice — first from the insurance company, and again from the lawsuit — for that loss. And if that’s the case, Walmart’s health insurance subsidiary is well within its rights to recover after it paid out for its client, even when a third party was apparently at fault for her injuries.

Yet it was the court that set up her trust fund — in an irrevocable trust at that — for her long-term care. That is a strong indication that the settlement money was for future, not past, expenses. And if so, the insurance company simply needs to swallow its losses, just like regular insurance companies would have to do.

The issue of long-term care for critically injured people — insured or not — is a big one that needs to be worked on. Meanwhile, insurance companies suing their clients who paid their premiums in good faith to protect themselves and their families from catastrophic losses is not a reasonable solution to the problem, nor is making someone sign away their rights when they’re in the most stressful situations possible.

So if you think you’re covered, you might want to think again. And think about pulling out your policy and actually reading the fine print to see if you’ve agreed to let them sue you after a catastrophic loss.

Source

• “Insurer Wants Woman’s Crash Settlement”, St. Louis Post-Dispatch, 15 August 2005.

Case Status

Would you be surprised that Walmart did, indeed, try to get the money? Of course you wouldn’t. They did. But first, the Shanks had to grieve for their son: he was killed in Iraq. Mrs. Shank went to his funeral, but due to her brain damage she continued to ask how he was doing. She grieved again and again each time she was reminded.

The Shanks lost the suit filed by Walmart, but it was “only” granted $275,000 in reimbursement — about what was left in the trust fund. The Shanks appealed, and lost again. The Shank’s lawyers tried to get it in front of the U.S. Supreme Court, but it turned the case down.

“They are quite within their rights,” agreed Jim Shank, “but I just wonder if they need it that bad.” CNN posed that question to Walmart. Spokesman John Simley said the case was “unbelievably sad,” but “Walmart’s plan is bound by very specific rules. … We wish it could be more flexible in Mrs. Shank’s case since her circumstances are clearly extraordinary, but this is done out of fairness to all associates who contribute to, and benefit from, the plan.”

“My idea of a win-win is, you keep the paperwork that says you won and let us keep the money so I can take care of my wife,” Shank said, even though he was indeed forced to divorce his wife in 2007 to get Medicaid coverage for her care. Meanwhile, he had his own medical issue: prostate cancer. To pay for everything he had two jobs, but it still wasn’t enough.

“Luckily,” Jim Shank said regarding Debbie, “she’s oblivious to everything. We don’t tell her what’s going on because it will just upset her.”

The public relations fiasco cost Walmart much more than a half-million bucks: online petitions sprang up to boycott the stores. It only took the company a week to give in.

“Occasionally, others help us step back and look at a situation in a different way. This is one of those times,” Walmart Executive Vice President Pat Curran said in a letter to Mr. Shank. “We have all been moved by Ms. Shank’s extraordinary situation.”

“We wanted you to know that Wal-Mart will not seek any reimbursement for the money already spent on Ms. Shank’s care, and we will work with you to ensure the remaining amounts in the trust can be used for her ongoing care.”

And, finally, “We are sorry for any additional stress this uncertainty has placed on you and your family.” More importantly, Curran said they would be modifying the health plan to provide “more discretion” in going after its employees’ lawsuit winnings in such cases.

In August 2010, Debbie Shank died.

Sources

• “Brain-damaged Woman at Center of Wal-Mart Suit”, CNN, 25 March 2008.
• “Wal-Mart: Brain-Damaged Former Employee Can Keep Money”, CNN, 2 April 2008.

My 2022 Thoughts on the Case

For the record, in the writeup I modernized Wal-Mart to the company’s current name styling, Walmart, but for accuracy I left the source article titles as they are still shown today in CNN’s archives.

What I really wonder after revisiting the editorial today — and learning how Walmart finally unwound the horribly unfair aspect of its employee insurance coverage — is how many other employees were sued by the company in this way? Happily, Jim and Debbie Shank’s particularly tragic case got publicity from the True Stella Awards and, later, by CNN, with its much  larger presence in a way no other examples did: it’s very unlikely the Shank’s case was Walmart’s first.

Letters

Generated by Case 98, about the prisoner injured during an escape attempt.

Paul in New York: “I am a practicing attorney and I do not always agree with you analyses of TSA cases, but sometimes I think you are exactly right. Bolton’s lawsuit is particularly outrageous, but in general, there is a growing problem of pro se [plaintiff acting as his own attorney] prisoner lawsuits. These guys sit around in jail with nothing to do and so some of them spend their time in the library cooking up suits or exaggerating legitimate claims. They have nothing to lose by filing the suits. They don’t have to pay filing fees and they don’t have to pay lawyers; this gives them something to do, gives them a chance to harass the system, and sometimes even the cases are meritorious and they win.

“Prisoners suits actually are better (from the prisoner’s side) without lawyers. A pro se litigant can say anything that he wants in court, and he can make any allegation that he wants, no matter how ridiculous. A lawyer, however, cannot make an argument that does not pass the straight face test. Bottom line: prisoner lawsuits are a major problem in the courts. The prisoners can and do make the most outrageously dishonest and disingenuous arguments, and there is very little that can be done to stop them.”

While it may be true that there’s little that can be done to stop them now, but surely there will be ways in the future, such as new laws to prevent such suits. I asked Paul if he had any ideas. He replied:

“There are a number of issues that have to be balanced to accomplish it, and I don’t have the answer. Although there is a flood of frivolous suits, and there have been a lot of bad decisions, you don’t want to close the door on meritorious claims, and there are some. There are a couple of suggestions that could be made, but they all have big problems:

“1. Maybe we should outlaw all lawsuits over prisoner rights and roll back all bad decisions by judges. This is really extreme, would be very unpopular at least among Democrats, and could probably never pass. Besides, that is throwing the baby out with the bath water.

“2. Raise the burden of proof on civil rights cases, under which prisoner claims are usually brought, so that it requires more effort and more evidence to prove the case. Right away this makes it harder for good cases to be brought as well as bad cases, and might make it nearly impossible for the next legitimate earth-shattering precedent to be brought (think Brown v. Board of Education, the end to the ‘separate but equal’ doctrine). Also, a federal statute would be required as well as federal regulations, and possibly even a whole new federal bureaucracy would be necessary to bring this about, so there would be a problem in implementation of this as well.

“3. Make a rule that cases brought by prisoners would have a higher burden of proof but leave the rest of the populace out of it. That would probably be a violation of the equal protection under the law guarantees of the Constitution, but perhaps you can get around that.

“4. Impose penalties on people who bring frivolous lawsuits. That is difficult because you don’t want to close the courthouse to potentially legitimate claims that are not stated clearly but which really are bona fide. As to truly frivolous lawsuits, there is Federal Rule 11 on the books that allows monetary sanctions for frivolous suits, but most of these suits are prosecuted by prisoners who are penniless, so monetary sanctions are not much help. Incarceration, or additional incarceration, for a frivolous lawsuit isn’t likely to happen. On occasion you see decisions where judges impose injunctions against filing further lawsuits, but these decisions are few and far between, and have big enforcement problems.

“5. Perhaps instead of changing the laws we need merely to change the way they are applied. That presents even bigger difficulties. First, juries are often involved and juries’ sympathies can be swayed. I was involved in a case years ago where a mugger was shot in the back while running away from his crime. The cops perhaps should not have shot him, and the mugger was paralyzed. The jury awarded the mugger $4.5 million for having been shot in the back in violation of police procedures. The mugging victim tried to sue to get some compensation once the mugger became a millionaire, but the statute of limitations had already expired. Despite that and numerous other bad verdicts, juries are constitutionally guaranteed. There is no way that will be changed.

“6. Perhaps judges should be removed if they make bad decisions. In my opinion this is the worst of the options mentioned. I don’t think we would really want to live in a country where judges are removed for bad decisions. It is unconstitutional, at least as to Federal judges, but more importantly, who would decide when a judge should be removed? If you say there should be a higher judge or maybe some other governmental official who decides which judges should be removed not for misconduct but just for making bad decisions, there is a name for that type of government: totalitarianism. The independence of the judiciary is a bulwark our democracy. You don’t want to give that mainstay of our society the boot.

“7. The last alternative is to screen judges carefully before they go on the bench. For the U.S. Supreme Court, the Federal Appeals Courts and maybe even Federal District Courts, a substantial effort is made to do this, and it is a big job. Do you want to do that for every judge who goes on the bench? In New York, judges are elected, and they only a ballot slot if their party designates them to run. Party bosses have little or no concern about what kind of judges they are putting up to run; they care about getting one of their guys/gals elected. We have seen some real losers and incompetents elected here. Right now there is a scandal about a judge who had a criminal defendant appear in her court on some charge or other. On one of the court appearances, detectives showed up with a warrant to arrest the guy for some other crime. This judge not only would not let the guy be arrested, but she even instructed her court officers to escort the defendant out of a back exit to the courthouse, basically helping a [wanted man] evade arrest. She was brought up on judicial misconduct charges, and she will probably end up removed from the bench, but who knows what other harm she has done.

“I’ve gotten a little carried away responding to you, but I will leave you with this thought: Judges and juries are human, and they err. Their errors open the door for bad people to do take advantage of the system. I am pessimistic that anything can be done to change this mess. We live in a time of extremely lax morals and limited character and backbone, and our courts and laws reflect that.”

I don’t present Paul’s words as a be-all, exhaustive study of this one part of the overall issue, but rather to demonstrate that the answers really are not simple or easy.

Also, it’s to demonstrate that even thoughtful, experienced lawyers who recognize that the system is in a huge mess are pessimistic about change, and at a bit of a loss to suggest ways to change just this one aspect of obviously frivolous lawsuits. It shows just how big the problem is.

Meanwhile, some defend the case.

Bruce in New Zealand: “Whichever way you like to interpret this sorry tale, it would seem to me the prison authorities erred in putting a civil felon into a cell with a capital criminal: a car thief in with a murderer. What were they thinking? If Mr. Bolton were to pursue this line of thinking when taking suit with the prison authorities he may have more success: that the prison authorities, in putting him in a cell with a convicted murderer, exposed him to extreme danger. Whether he fell, was pushed, shared the escape or resisted it, all becomes incidental to the prison’s initial and actionable error. Slinging off at this wheelchaired, brain-damaged man is not going to help anybody — apart from those who feel awfully smart demeaning others.”

Well, maybe you should sit down then, Bruce: you speak of a “convicted murderer” (and a “capital” one at that) versus a “civil felon.” Nope. Both are accused felons (and there’s no such thing, at least in the U.S., as a “civil felon”): it was clearly noted that Bolton’s cell mate was accused of homicide, just as Bolton was accused of multiple felony vehicle thefts, and both were awaiting trial. It is fascinating that you give the benefit of the doubt to Bolton, but not his cellmate, and then ascribe negative motives to the messenger based on your own careless reading.

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