Wisconsin Public Television University Place UW Law School  A Conversation With William Shernoff Margaret Raymond  Sept.24,2012 UP772 CC >> It's a pleasure to welcome you to the second in our series What I'm Doing With My Law Degree, and I'm really delighted to welcome William Shernoff here. Bill is a 1962 graduate of the University of Wisconsin Law School, was just here to celebrate his 50th Law School reunion, and on Friday received the Distinguished Achievement Award, the highest honor that the Alumni Association can bestow on a graduate of the University of Wisconsin. So, it's been a pretty nice weekend having Bill here with us. When he is not visiting us here in Wisconsin, he's a named partner the firm of Shernoff Bidart Echeverria and Bentley, with offices in Claremont, California, and Beverly Hills. His work, which you will hear about, focuses on representing policyholders in disputes with insurance companies. Bill played a critical role in developing the tort of insurance bad faith, the doctrine that requires insurers to deal fairly with policyholders and to be subject to punitive damages for their failure to do so. His clients, in these cases, have ranged from a man whose insurer refused to pay a $48 claim to descendents of Holocaust victims seeking to recover on life insurance policies on lost loved ones, work that resulted in the creation of a $5 billion fund to compensate those families. I think it's fair to say that Bill has used his legal training to protect and defend the rights of ordinary people in their disputes with large, powerful insurance companies. I'm excited to have him share some of those experiences with us today, so please join me in welcoming Bill Shernoff. [APPLAUSE]  Well, Bill, you're a big lawyer, but you didn't start out that way. 

You grew up in Crivitz, Wisconsin. Tell us about Crivitz, Wisconsin. >> Crivitz is a real small town, and when I left the small farm, I moved to Crivitz when I was about eight years old and Crivitz had 500 people at that time. Now it's got 998. So it's grown quite a bit. My education wasn't the greatest in small town high school, so I was struggling. Also struggled, my parents sent me to the University of Miami in Florida for undergrad. They wanted to get rid of me and send me as far away as possible, so I ended up in Miami and was still struggling quite a bit. And then didn't really know what I was going to do until my dad, who is a lawyer in Crivitz of all places, small, little practice taking care of tax returns and leases and divorces and stuff like that, he said, well, why don't you go to law school? So, I ended up here, and my first semester was also a struggle. I told the story the other day about how my very first semester I didn't make the cut off. 

They said 50% weren't going to be around after the first year, and I was, like, two points shy of what the cut off was. I think it was around 70 at that time, if I recall right. But one of my professors had added up my score wrong. So when it was recalculated, I made the cut by a couple of points, and then things kind of turned around for me. The professors here were just really great, and they inspired me, kind of like my awakening, and I just got the spirit of the whole University of Wisconsin Law School. I liked the fact that I knew I wanted to represent the average person against what I call corporate America. And I've had a lot of fun doing it. It's pretty easy going up against an insurance company that's abused somebody and asking a jury to punish them with punitive damages. A lot of jurors are pretty receptive to that. I can't say I've done anything extraordinary, but I've been lucky. 

And I have a lot of fun at what I'm doing. >> So your first job at a school actually was with the US Army JAG. What caused you to become a military lawyer, and tell us a little about your experiences doing that. >> Well, at that time when I graduated in '62, which is like a hundred years ago, it's almost 50 so... [LAUGHTER] There was a draft going on. You had to go into the military, either as an enlisted man or, if you were lucky, you could apply to be an officer with the JAG corps. And I did apply and I was accepted. So I went in as a first lieutenant. And they sent me to a place called Ford Leonard Wood, Missouri, which everybody said it's just an awful place to be. Some of my friends went to San Francisco or down to Florida. 

But it turned out to be great for me because I represented soldiers in court-martials. And I, right away right after law school, I was just thrown into court-martial work where I would probably do one a month for three years. And they were very, very tough cases to win when a soldier goes up in front of a court-martial. So between the court-martial work I did legal aid for soldiers who had problems with debts or problems back home. We had to deal with other legal problems. So I'd see about 20 soldiers a day, and then I'd have to prepare for court-martials at night. And then, also, I had to do lectures on military law, which were, like, at 5:30 in the morning when all the troops just wanted to sleep. We'd try to keep them awake with military law, which is pretty dry stuff. [LAUGHTER] So that was a great experience. Three years in the JAG corps. 

Between the law school on the academic side and the JAG corps on the practical side, that was really my foundation. From there, I went to California. >> And what made you decide California? >> Well, I don't know if I put a lot of thought into it. I had a job here back in Madison with a private law firm. And I also had a job out in San Francisco with the National Labor Relations Board. And I was in Missouri, Fort Leonard Wood, Missouri, at the time, and I really wasn't sure which way to turn. I remember going out the front gate deciding whether I was going to turn right and go to Madison with the law firm or go left and go to California. And I think I decided to go to California because it just seemed that California, at least at that time, was more of a fluid society. There was just more going on, more chance to get ahead, more opportunities out there. So, there wasn't a lot of thought. 

So I stayed with the National Labor Relations Board for one year. I took the bar exam in California, passed it the first time, and then went into private practice right away with a plaintiffs firm. >> And were you just waiting to see what walked in the door? What was it like to be the junior lawyer in the plaintiffs firm? >> Well, it was a small firm in a small town of Claremont, California. There was only the one lawyer, and I was his assistant. And he was kind of a mentor to me. At that time, we did personal injury, we did criminal work, we did divorce work, a little bit of everything. But I think personal injury was probably 50%-60% of the work. I liked representing injured people. I learned a lot about torts from the University of Wisconsin. I had a great torts professor. 

I think his name was Campbell. I'm sure he's not around anymore, but he inspired me. Torts is an area where you can represent the average citizen against either an insurance company or any large corporation that's committing torts on people, and they do it every day to an average citizen. So there's a lot of opportunity to what I like to say going up against corporate America for the average citizen, and the remedies are there. You just have to be willing to take the risk, I guess, of working on a contingency fee because all of my work has been on a contingency fee. In 50 years, I've never sent a bill out to anyone. So we have to win to get paid. And so that's a great motivation. [LAUGHTER] If you don't win, you don't pay your bills. >> Was that scary early on? >> It's pretty scary. 

You have to be a risk-taker for sure. You have to be willing to sacrifice the comfort of working for a law firm where you're going to get paid every month and everything's going to be fine. But, on the other hand, when you work by the hour there's only so many hours in a day. And no matter how much they charge by the hour, I don't know what they charge in Wisconsin, but in California we're up to $750, some of them are even $1,000 an hour in the bigger corporate firms. Not for the young associates. I'm sure they grind the young associates and make them work long hours and not that great of pay. But even when you make a partnership, you're limited. You're limited to the number hours in the day and how much you can charge. You could make a very good living, but it's not the same as getting, let's say, a $50 million verdict and take a third of it. That's a different story. 

And that can happen. It can happen easily. >> So talk about how you went from being a general practice lawyer to developing your area of expertise. Was it the Egan case that made you an expert? What happened? >> Well, it was one, I think it happens to a lot of people like this. In my case it started out one case before this Egan case you mentioned where I represented a farmer in California who had a disability insurance policy. And this disability insurance is the type of insurance if you're disabled you get X number of dollars a month to live on. And he was disabled, but he wasn't getting paid. And he came to me and said, you know, I'm tired of paying a lawyer to write letters. This lawyer had written four letters for him and nothing happened, and he paid him by the hour. He said I want somebody on a contingency. 

So okay, I'll take it on a contingency. And I looked at his disability policy, and back then they had this clause in his disability policy that said he had to be house-confined as well as disabled. Today, they outlaw that kind of a clause because, in his case, they cut him off because his wife took him to the doctor. So they said, hey, you're no longer house confined. Obviously, I thought that was outrageous that they're going to cut him off because he had to go see the doctor. How bad is that? And there wasn't any bad faith law at that time. It was just kind of like a case of fraud. I think I pled it as a fraud that they had made a promise to pay him, and they put this clause in to kind of trick him. And the jury came back with a punitive award, I think around $350,000 at that time. And that got in a local newspaper, and then maybe four or five other clients came in with similar problems. 

And about two years later, the case that the dean just referred to called Egan vs Mutual of Omaha was a case that really started, not only my career, but kind of established the law of insurance bad faith. It was in 1974 I tried the Egan case. And that case was a gentleman that had, again, a disability policy from Mutual of Omaha, and it paid him, I think it was $250 a month if his disability was a result of an accident. It would pay him a lifetime, $250 a month a lifetime if his disability was a result of an accident. If it was a result of a sickness, it would only pay him six months. There's a big difference whether it was between an accident or sickness. They still have that today, these disability policies, whether it's an accident or sickness. You might ask yourself why. The reason is the insurance companies, they figure out everything. Very few people are disabled because of an accident. 

98% are disabled because of a sickness, so they limit that to six months. Mr. Egan was a roofer. He was working on a roof and he fell eight feet to the ground, and hurt his back very severely. Had back surgery which was unsuccessful, and then he went on disability. And they started it out as an accident, which it was because he fell from a roof, but then they reclassified it as a sickness. And they said he had arthritis in his back and that was a sickness. And so they cut him off. And we tried that case to a jury, and the jury was very upset, obviously, that Mutual of Omaha would try to pull such a stunt saying that falling from a roof was a sickness. And in that case, the jury came back and gave him his insurance policy benefits which were some $70,000, and they hit him with a $5 million punitive damage award. That case went all the way up to the California Supreme Court. 

The Supreme Court basically came out with this law that established insurance bad faith saying that an insurance company has a duty to treat their policyholders fairly in good faith. And they explain that it's over and above the contract. It's implied in law duty of good faith and fair dealing. And if they breach that duty of good faith and fair dealing, they not only will owe the insurance policy benefits, but they have to pay the policyholder for all the mental and emotional distress they go through when they're cut off because a lot of people when they lose their insurance benefits, whether it's disability or medical bills or you can have a flood or a fire, it's stressful. And you're counting on this insurance money to keep you alive, so to speak, financially. And when you don't have that money, bad things happen to you. You can go bankrupt. You could lose your house to foreclosure. Things like that. So, that case got a lot of notoriety. 

It was in Time magazine. It was in all the national papers. It was a California Supreme Court decision which, from that point on, it was just a flood of cases. I must have had 20 or 30 in the next month that just kept coming in. And they're still coming in today because one thing leads to another, and you just have more people coming in with disputes with their insurance companies, whether it's life insurance, health insurance, homeowner's insurance, any type of insurance. >> Well, we have a lot of first-year students in the room, so maybe you could talk a little bit about how you strategized asking the California Supreme Court to recognize a new cause of action. How did you make a tort? >> Well, I don't think I really thought about it in those terms. I was just thinking about advancing my client's cause, and trying to, basically, say this is unfair. The law of contracts didn't really neatly fit into the situation because we have a law in California that you cannot get punitive damages simply for a contract action. So we had to construct something where you could get punitive damages because just getting the person what he's owed in the first place isn't going to do any good. 

So I think it was more the court that really saw a need to provide a remedy for people and to allow punitive damages as a deterrent to unfair conduct by insurance companies because insurance is a very, everybody has insurance. It's almost a necessity of life. And I think the courts want insurance companies to behave. And when you have an -- like insurance that makes profits based upon the less they pay out, the more money they make. You hear this phrase with health insurances: profits over patients. And that's true. Today, most of my cases are in health insurance where people have health insurance but then they have a surgery or they're taking medicine and the insurance company figures out a way not to pay them even though they're covered. So, the fact that you have coverage is just the first step when you really need it, and if they're not paying and if they used an excuse for not paying that's not valid, we go after them. Right now in health insurance, one of the big issues is, and I have several cases like this, where people have health insurance, they follow their doctor's orders, and they have, let's say, a surgery. And after they come home from the hospital, they expect their medical bills have been paid. 

Instead, they get a letter from the insurance company saying we're not going to pay your medical bills because in our judgment your treatment or your surgery wasn't medically necessary.  So they're overruling treating doctors. Today it's a big industry for health insurance. It happens in every state because all health insurance have their own little medical department, and if they think that whatever your doctor did wasn't medically necessary, they're not going to pay. So the question becomes, who should determine whether a medical treatment is medically necessary? Should it be your doctor or should it be the insurance company? And let me tell you, when you put that question to a jury, they understand. They get it. And the last case I had last year was a similar case where a gentleman was in the hospital for a hundred days, and the insurance company said we're only paying for 19 because the rest of it wasn't medically necessary. And the jury came in with $19 million in punitive damages. So these are pretty easy cases. It doesn't take a genius to win these cases, really. 

[LAUGHTER] >> Okay. So a good day, you get the Egan decision from the California Supreme Court, you get a $19 million punitive damage verdict for your client. Any bad days? >> Yeah, a lot of bad news. It's usually the first step and the easiest step is getting a verdict. The hardest thing is keeping it because there's such a thing called a motion for new trial where the trial judge can cut the award, which I think is really unfortunate because when you're in trial, a judge is telling the jury how important it is, how important jury service is, how much they appreciate a juror doing this and that, and then they come in with a verdict and they go home and the judge undoes everything. He may cut it in half; he may cut it altogether. And if he lets it stand then there's an appeal. And the appellate court likes to cut verdicts also, especially in these days with the courts being more conservative than they were when I started out. There seems to be a movement toward putting limitations on things like punitive damages which makes our job a little more difficult, but things do have a way of going back and forth on the law. So, that's it. 

>> Some of the students here had the pleasure, well we're moved by watching the film On Moral Grounds the other night when we showed it here. But for those who didn't get a chance to see it, I wonder if you'd talk a little bit about the litigation on behalf of the families of Holocaust victims. >> Well, through one client of mine we discovered that there were thousands of people who died in the Holocaust that had life insurance. Never got paid because the insurance companies in those days were European insurance companies, and they kept it secret. They didn't go out to try to find survivors. They just kept the money. So, I had a client whose father died in the concentration camps in Auschwitz, and we knew he had life insurance. The family kept writing to this insurance company called Generali, which is an Italian insurance company doing business all throughout Europe, and they kept saying no, we can't find a policy. This gentleman's name was Adolph Stern. They said we can't find any policy for Adolph Stern. 

We don't know what you're talking about. And this went on throughout the years for 10-15 years. And then one day we discovered a warehouse in Trieste, Italy, that had 300,000 life insurance policies of Holocaust survivors that were never paid, and Adolph Stern's policy was there. Actually, a whistle blower told us about that. So, we ended up with several families who had life insurance, and we took the case even though we knew we would have a lot of problems. We thought once we found his policy that they would pay him, but no, they didn't pay him. So now we had a real problem on our hands because we had a life insurance policy, we knew a lot of other people had a life insurance policy, we knew they weren't paid, but the policies were written in foreign languages, the currency was foreign currency. Adolph Stern's was 10,000 kroner. I had never heard of a kroner. Didn't know what it was worth. 

And we find ourselves with problems with the statute of limitations. We found ourselves with jurisdictional problems. We had to overcome all of this. And the worst part of it was the insurance company hired the biggest and best law firm in the United States against us. It was a firm called Skadden Arps, some of you may know. It was a New York office with a thousand lawyers, and then they had their California subsidiary with another 200 lawyers. And they said, first of all, there was no jurisdiction in California. Second of all, they said even if there was jurisdiction in California, if I would only look at the policy and interpret it, there was something in there called a form selection clause. That means they had a right to have the case tried in Czechoslovakia where the policy was issued. Under Czechoslovakian law, which provided no remedies to it, and even if we got over that, they said that the currency, the kroner, after the war was devalued down to nothing. 

So even if I won, I'd get $300 for my policy. That's what they said it was worth. And the statute of limitations, of course, this was, like, 50 years later. Something like that. So we were able to go to the legislature in California and introduce a bill to extend the statute of limitations to, back then it was to 2010. So we overcame that hurdle. We overcame the hurdle of the foreign selection clause and the Czech law. I remember telling the judge if you apply Czech law it's going to be checkmate because Czech law is non-existent. >> How many lawyers on your team, by the way, as you're dealing with all that? >> There was the lawyer that referred the case to me, and there was two of us and about two or three associates. So we overcame all those hurdles, and we had a trial date. 

The judge issued a trial date. The judge also issued an order that the executives from Generali had to come from Italy to California for a mandatory settlement conference. And with them staring at a trial date with punitive damages on a case like this, I think they knew that they were in trouble, finally after maybe four or five years of litigating all these issues. They decided to settle the Stern case for, well it was confidential. Let's say it was over a million dollars rather than $300. And there were other families that they settled their cases. And then, by that time, there were class actions in New York. There were other lawyers involved in New York who filed class actions. And then somewhere along the line, they formed an international commission to deal with all of the claims because there hundreds of thousands throughout not only the United States and Europe and Russia. All these Holocaust survivors started to come out and claim, yeah, my grandfather had health insurance. 

Or yeah, my grandmother told me on the way to Auschwitz that if anything happens to me we have insurance because back in those days, I guess, the Jewish population believed in life insurance. They didn't trust the banks that much. They thought they should get life insurance. So, the international commission saw to it that many, many Holocaust claims got paid, and then, this was when Clinton was president, he appointed a Secretary of Treasury, Eizenstat, to start negotiating with the German government about another settlement. It was a German foundation settlement where the German industry and German government put up $5 billion. So that was the result of the whole thing that was kind of started with the one little case in California. That's how things go. One thing leads to another leads to another, and if you keep pursuing it, you can do well. So, at the end of the line there was $5 billion distributed to the Jewish population for not only insurance but was broadened out to give people compensation for slave laboring, which the Nazis did back then. They made a lot of people, not only Jews, but other people do slave labor to help their war effort. 

So that was a very interesting case. It brought in a lot of notoriety through the newspapers and all over. And I was lucky enough to be in on the ground floor of that. >> Wow. You've been involved in some amazing things. Now I want you to go back 50 years. You're a law student. You're just about to finish. What do you wish somebody had told you? So something that would have been really helpful for you to know. And the next question, of course, is what is it that you think these folks should know that you can tell them. 

But let's start with you 50 years ago. What would you have wanted to know that maybe you didn't know as you emerged as a new lawyer? >> Well, I think I was pretty scared going out as a new lawyer. Maybe somebody should have told me just follow your desires, whatever they are, whatever you think your passion is for law. Everybody has a different interest in law. Some people, I think their good advice would have been follow your interest. Don't go somewhere just because it's comfortable. And I think that would have been good advice for me, and I think it's good advice today for students. I know that a lot of students, if I were to give some advice, a lot of students, especially if you have debt from student loans, their parents want them to have a good job when the graduate from school. So the place to go is probably a big law firm. You don't know what you're going to do there. 

Going to work very long hours  for little pay, or maybe even decent pay, but you could wake up five, six, seven years later and say, boy, what am I doing here? I don't like what I'm doing. I'm working for corporate America. I'm helping draft these contracts that are screwing people. I'm helping draft the arbitration clauses which keep people out of their right to a jury trial. Or I'm helping a health insurance company draft a health insurance policy that has a loophole in it so they don't have to pay. I have run into a lot of students after five, six, seven years, they're really not happy. They're working long hours. They're not doing anything they really like, but they're getting paid. They pay their bills. And maybe after seven, eight years they become partner and they still don't like what they're doing. 

So if that's your interest, if that's what you want to do, follow that. But if you're interested in making a difference in this world and trying to represent the average person and going up against corporate America and trying to make them honest and not put profits over patients but to try to create a balance between the power structure of the corporations that have all the power and the average person who doesn't have much power. The jury is a great equalizer, and the law is a great equalizer. The law has a lot of consumer remedies in it for average people. Not only in California but Wisconsin too. There's always consumer remedy acts. Wisconsin adopted insurance bad faith back in the '70s, and I'm amazed, there's a case called Anderson vs, I think, Continental Insurance, if I'm right. You get the same law in Wisconsin as you do in California, practically speaking. People in Wisconsin, I'm sure, are getting taken advantage of by insurance companies just as much as in California. Yet I look around and nobody's doing insurance bad faith in Wisconsin. 

Why? You could make probably 50 times more money if you're successful than ever working for a big law firm. But yet nobody grabs that opportunity and runs with it. And I never could understand why. People here do a lot of personal injury work on the plaintiff side, and you can certainly make a lot of money doing that. You could start out with a plaintiffs firm. I would suggest starting out with a plaintiffs firm even if it's a small plaintiffs firm just to learn the ropes about how to select a jury. What makes a jury tick, so to speak. Develop your trial skills. It doesn't take a lot to do that, and after five, six, seven years, you'll find out that you're very skilled at what you do. You can make tons of money if you want to on the plaintiff side helping consumers, helping average people. 

It's not easy. You've got to be willing to take risks because if you're working on a contingency, you got no money to pay you bills unless you win. So you're going to be motivated to win, believe me. [LAUGHTER] Because that's the way you're going to be successful. And juries today may be conservative a little bit, but if you stop to think about it, punitive damages kind of plays into the conservative mind set because conservatives like to punish people. If you think about it in criminal law, if somebody is stealing, they'll punish that person. They want to put them in jail and throw the key away. Well, you can appeal to the, starting out with your voir dire examination, you can appeal to that part of the conservative mind set is saying if you find this insurance company has taken advantage of this person and done something that's fraudulent or blah, blah, blah, would you have any hesitation of punishing them? When you get to punishment, you can argue that if an insurance company has got, let's say, a billion dollars worth of net worth, you're just arguing at the end of the day, at the end of the case, for maybe one or two percent to punish them. That doesn't sound like a lot. Just talking about one or two percent, which could translate into $3 million or $4 million or $5 million or $20 million. 

So, I would hope that some of the students here would at least think about their career on behalf of what the politicians call today the great middle class. >> A great place to stop and take some questions, if you all have any. We have a few minutes, and Bill's agreed to take some. So, questions from the floor here. >> Hi. I'm wondering, it's very clear from listening to you that, one, you're very successful but you're still a Wisconsin guy. I mean, state of Wisconsin. The way you say it wasn't that big of a deal, you very much play down your own importance. And I'm wondering if that sells to juries and if you exploit that? [LAUGHTER] >> You know, what really sells to a jury, I think, is for me to empower them. In other words, jurors, they go to the jury assembly room, they don't want to be there, they got their own problems, and they don't think what they're going to do there is all that important to make a difference. 

But if you could get across to them, starting with voir dire, and you're somewhat humble that this case is a case where their vote, and I tell them this, I said you can vote every time in every election and you don't even know if your vote ever counted because you're one of a million. You think your whole vote just got diluted down to nothing. But in California, it only takes 9 out of 12. Nine votes could change the way a big insurance company does business. Nine votes could, if it's a big punitive award, it gets in the newspapers, they may change management. They may make them a better company. I actually argue a big punitive award will make this company a better company because they'll understand they did something wrong, they shouldn't do it. Maybe heads will roll, management will change. So it's an empowerment argument that you are important. You're really important. 

This is the first vote you're ever going to cast in your life where you are going to make a difference in society. And coming from Wisconsin in a small town I think does help me because there's a lot of lawyers today, they get in court and they just talk a lot. They never listen. And you can't learn anything by talking. You've got to learn from listening. And so I do listen a lot. I listen to the jurors. I listen to the judges, witnesses. So it's just a matter, I didn't start out, I think my first four or five cases I lost five out of the first six. And that's where I learned from my mistakes, and I was telling the dean that. 

She asked me about that earlier, and I said you don't learn that much from the ones you win because you think you did everything great. [LAUGHTER] What did you learn? Gee, I got this great award, I must have done everything great. But when you lose, you think oh, my god, I should have done with argument, I forgot this argument, I shouldn't have put this witness on. Next time I'm going to do it better, I'm going to do it different. >> So, I have a question for you. I think I hinted to you on Friday that I am getting involved in a case against life insurance companies. >> Yes. >> And so I've been studying the intricate law that is at play there, and what I find is in these small plaintiffs' cases the conduct of the insurance companies is actually quite egregious. But these clients really do take settlements at small amounts because the claims are small, and they don't want the risk a trial. And so I wanted to ask you, how is it that you have your clients go forward in these very risky situations when they probably, maybe, would have settled for a lot less? And aren't these companies really extending offers of settlement to you because you wind up trying a lot of cases, and that's really impressive. 

>> Well, that's true. In the earlier days on the cases I was talking about, they didn't offer that much money. So it wasn't that hard to talk the client into going to trial because the offers were very small back in those days. Today is a whole different story. They don't want to go to trial. When I talked about contingency fees, I've got cases where today I could file a complaint and no discovery and they're calling me right away and they're just showering my client with money, and it's very difficult not to take it. They just want a confidentiality agreement so nobody else knows what they paid. In cases where I want to make a difference, because I usually think of myself as doing crusades rather than cases, people can be easily influenced to go to trial because they know it's going to help other people even if it's a small amount. Say, look, what happened to you is happening to so many other people. We've got to stop this. 

There's only one way to stop it is with the big punitive award. Do you mind carrying the flag for all these other people? And some people will say, you know, I've been through so much, they tortured me so much, I don't care how much they offer me, let's just go to trial. And there are people that will accept that. There are other people that say, look, I'll take the million dollars, I'll sign a confidentiality agreement, forget the trial. So, it just depends on the client. I usually do try to tell them these cases are for deterrents. Just depends on the person, really. Some people are very much for you and want to go all the way, and other people want to take their money and run. >> What are the next burrs under the saddle? What are the next things that are bugging you that ought to go different? >> Well, I think I mentioned kind of the crusade I'm on now, and I just filed a big case along with the doctors in California, the Los Angeles County Medical Society. I don't like the fact that the insurance companies are overruling treating doctors on what's medically necessary. 

I think that's horrible. And it's happening so much all over the country. And insurance companies are saving a lot of money by doing this, and they're hurting a lot of people. And not only on surgeries but whether you should be in the hospital, how many days you should be in the hospital. For example, if you're in the hospital eight days, they may only pay you for four because they didn't think the other four are necessary. Well, what are you supposed to do? Walk out of the hospital by yourself without your doctor discharging you? It's crazy what's going on. So my next burr, as you call it, is to see if I can put a stop to this idea of insurance companies should decide what's medically necessary for people. The other side of the coin is insurance industry will say we've got to cut down the cost of healthcare. And there's a lot of doctors out there that are doing things that are unnecessary just to run up the cost of healthcare. So they have that argument, and I come back and say, well, maybe discipline the doctor, if he's, like, a Blue Cross doctor, Blue Shield doctor, but don't take it out on the patient who's paid for health insurance. 

And we do have a law in the books in California that says they cannot overrule the doctor unless they show the doctor did something that was plainly unreasonable, but they don't pay attention to that law. They just have their own definition of medical necessity. >> I was going to ask you the next question which is the obvious counter argument is there's a lot of doctors who, the system is so incompetent that people are staying in hospitals longer than they should and having procedures they don't need and that kind of thing. And you already sort of pre-staged the answer which is sure but don't settle that on the backs of patients. >> Right. And if you want to discipline the doctors, discipline the doctors. But what's happening is... >> The system. >> Yeah, the system. >> Discipline the system. 

>> Exactly. >> We have time for another question or two. Let's see if actually some students want to ask a question. [LAUGHTER] My colleagues are into it. [LAUGHTER] >> I have a question about the Affordable Care Act and your thoughts on that law. Do you see any potential remedies for what you've been describing, the predatory practices of health insurance in that law, and if not, if there are other ways that policy could be addressed on these issues. >> Well, that's a really good question. I don't know what the impact of that law is going to be because, number one, there's going to be more customers. They say 30 million people are going to be added that have to have health insurance. So that will probably be more disputes and more cases. 

But, on the other hand, the one thing I don't want to happen is what happened with ERISA where the ERISA law preempted all the state tort laws, and there's really hardly any remedies in the ERISA law. So lawyers don't even take those cases anymore. So if you get your health insurance, for example, through your employment, which a lot of people do, and you get screwed by you health company, you basically have no place to go other than federal court under ERISA which is wasting your time  pretty much. So, I don't know if the Affordable Care Act is going to preempt these great consumer laws that we have in Wisconsin and California and other states. I think the jury's out on that. We'll have to see how it develops. >> One more question. >> Bill. >> Yes. >> I wonder if you'd like to spend just a couple minutes talking about your representation of American Samoa. 

We find that quite interesting. We have a conference on future punitive damages, as you recall, a few years back. >> Yeah. Well, that was a hurricane case. There was a big hurricane in American Samoa where it really devastated, not only homes, but government buildings. The courthouse got flooded. The governor's mansion got flooded because all of the buildings, it's an island and all the buildings were on the peripheral of the island, and this hurricane just devastated it. The government of American Samoa had a $30 million insurance policy that actually covered hurricanes, and the insurance company came in and said, well, if you read the policy closely, we cover wind damage, but we don't cover water damage. And that's kind of the way it is most policies in the United States. If you look at your homeowner's policy, and people in Katrina found that out the wrong way, is that if you have damage that's caused by wind, you're going to get paid, but if you have floods, the private insurance industry doesn't cover floods. 

You have to go buy a separate insurance through the government flood program. So, out of $30 million worth of damages, they paid, like, $6 million that they said was due to the wind, and they said we're not paying the $24 million that was due to floods. And, in that case, we were able to demonstrate through some expert testimony that really it was the wind that caused the waves to go to shore. [LAUGHTER] It was, like, big 20 feet waves. So we were able to make an argument that it really was the wind. Even though it was a flood, it was the wind that caused the flood. And we were able to convince the jury that that was a good argument, and, in that case, they came in with the $30 million and they added another $80 million in punitive damages. So it came out real good. [LAUGHTER] >> Bill, thank you so much. Please join me in thanking Bill. 

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