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twitterHepatitis case has escalating side battle
Insurance company, bankruptcy trustee at odds over control of money
Las Vegas Sun File
Dipak Desai, majority owner of the Endoscopy Center of Southern Nevada, is insured by Nevada Mutual, which has threatened to cancel the policies.
Thursday, Oct. 22, 2009 | 2 a.m.
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Beyond the Sun
In court battles over huge amounts of money, all sides go to the mat every step of the way.
That’s what’s taking place behind the scenes in the massive litigation over last year’s hepatitis C outbreak.
A nasty fight has erupted between Nevada Mutual Insurance — which holds the comprehensive malpractice insurance policy for Dr. Dipak Desai, his three clinics and the other medical defendants in the case — and the bankruptcy trustee trying to gather the clinics’ assets to pay off creditors. Former clinic patients alleging they were infected with the hepatitis C virus are at the top of the creditors list.
The trustee, Brian Shapiro, and Nevada Mutual are battling for control of both the insurance policy, which is said to be worth $54 million to $60 million, and separate funds the insurance company is obligated to set aside to defend the clinics in the endoscopy lawsuits.
Shapiro contends the insurance proceeds are the biggest assets of the bankrupt clinics, which have a combined $100,000 in cash.
Robert Cottle, a lead plaintiffs attorney, boils it down this way: “All of this is about lawyers and companies covering their behinds so they don’t get sued when the cases are over. Because of the limited amount of money available for settlements, no one wants to be sued for not distributing the money fairly and appropriately.”
But the bitter fight between Shapiro and Nevada Mutual is further complicating the complex endoscopy litigation and making it tougher on the thousands of former patients who have sued the clinics.
Neither party, for example, wants to foot the bill for storing and organizing hundreds of thousands of pages of patient records, many of which are crucial to the litigation. And no one has been hired to sort through the extensive computer records kept by the clinics. As a result, the plaintiffs can’t even obtain their own files to see exactly who treated them and what medications they were given during their medical procedures. The records and the computers are sitting unattended in a warehouse.
“We’re being denied access to basic evidence,” said Will Kemp, another lead plaintiffs attorney. “It makes it difficult to identify witnesses and take depositions.”
As the fight became more tooth and nail, Nevada Mutual accused Shapiro of failing to provide clinic records and witnesses to help the company defend malpractice claims against Desai and company. Shapiro in turn accused Nevada Mutual of trying to disburse insurance money in a way that is unfair to all of the clinics’ creditors.
Shapiro aggressively opposed what turned out to be an unsuccessful bid by Nevada Mutual to settle with one of the creditors, Michael Washington, a former Desai patient who alleges he was infected with the hepatitis C virus in 2007. Shapiro complained that Nevada Mutual wouldn’t even tell him the amount of the settlement. Nevada Mutual said it was confidential.
Then Shapiro decided to go mano a mano, obtaining an order from a bankruptcy judge to grill top Nevada Mutual executives under oath about the insurance policy. Nevada Mutual counterpunched by asking the same judge for permission to take Shapiro’s sworn deposition.
Bankruptcy lawyers said such a move against a bankruptcy trustee is very rare.
“I don’t know what their motivation is, but maybe they’re saying two can play this game,” longtime bankruptcy lawyer James Patrick Shea said.
Nevada Mutual won’t comment during the litigation, but Walter “Skip” Scott, a Dallas attorney Shapiro hired to help him with the bankruptcy proceedings, acknowledged a “fundamental rift” between the two parties — one that will likely worsen before it improves.
One way it will get worse is if Nevada Mutual follows through with threats to cancel the insurance policy and not pay legal claims against the clinics. The company is alleging Shapiro breached the policy’s terms by not cooperating with the company’s defense in the endoscopy litigation. Shapiro denies the accusation.
Nevada Mutual’s strategy is sure to lead to open warfare in separate legal proceedings in Bankruptcy Court that will put up still more obstacles for the lawyers suing Desai and the clinics.
“These skirmishes are all sideshows to the main event, which is getting the cases to trial,” said Kemp, the plaintiffs lawyer. “If we can do that, we’ll be on the golden path to a global resolution.”
The first trial, however, isn’t expected to get under way until April. That, of course, would be the absolute earliest because there’s still plenty of time for the battle playing out between Shapiro and Nevada Mutual to steer everyone further off that golden path.
Jeff German is the Sun’s senior investigative reporter.
Discussion: 8 comments so far…
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do you think desai is going to play golf today???
maybe catch a movie???
what the hell is district attorney david roger doing???
what the hell is attorney general catherine cortez masto doing???
what the hell is monkey boy i have no leadership skills whatsoever gibbons doing???
what the hell is the medical board doing???
clowns...
think keystone cops...
nothing has changed...
the citizens of nevada are not safe...
our public officials are complete and total jokes!!!
Don't forget. Every move costs money and it all comes out of the pot to eventually be split. Attorney's and trustees make the money and the victims are left the scraps.
I wonder how much - exactly - those that were wrongly infected will come out with in the end. At the rate this lawsuit is going it sounds like pennies on the dollar.
According to the article Nevada Mutual tried to do the right thing by settling ahead of any court proceedings.
Unfortunately Dr. Hepatitis who is supposedly unable to participate in his own defense due to a debilitating stroke he suffered a while back jumped in and stopped the settlement from taking place.
In a case like this one any deception on the part of the defendant or his attorneys should be dealt with severely.
Dr. Desai should have read his insurance policy and the rights of the carrier to settle when the doctor they agreed to indemnify does something criminal. They can do this, it's the right thing to do and Dr. Desai doesn't have a say in it. He signed the contract with the insurance company when he bought the coverage. The carrier is not in the wrong here Dr. Desai is. I hope they gain all of his assets and distribute them to all the people he infected. Even if this bankrupts the carrier (which it very well might) the receivership can distribute settlements.
Nice article, Jeff. This is a bit confusing, though; carriers normally have the contractual authority to settle, regardless of whether the policy holder wants to do so.
The courts will force their hands in this situation...in the end.
What a joke shapiro is? It looks like he just wants his 3% management fee and his shot of spending down any monies to the detriment of the people who really need it. The insurance carrier is the only party with any scruples in this sham!!