good afternoon if it may please to court we're here looking at a seven million six hundred thousand dollar bankruptcy court award in favor of serving insurance we're looking at only two aspects of this award i will be forced to discuss the facts at length to phrase the legal issue but i understand that i must phrase it as a legal issue in order to have any real chance here at a reversal and i believe that i will point out to the novo issues of law that will support my argument that this should be remanded to the victims of court now the bankruptcy court was estimating claims i don't think that's an important distinction here because the bankruptcy court estimated them for allowance other words not just for billing purposes we are required to pay every dollar of these claims and a standard on review for estimation or allowance is the same so we're really talking about a bench trial over the course of more than a week the liquidated these claims my clients are the debtors or ward of debtors in bankruptcy and as i've briefed we were in bankruptcy because our accountant st the forty million dollars were supposed to pay to serve the f b i found him later on and he was convicted and sentenced to more than six years in federal prison together with an award of restitution but it put us in a difficult as we are professional employment organization important in this industry with so many employees mostly in texas but also in many other states and we were obligated to pay zero rick well i'm sorry zurich was obligated to pay any insurance losses over five hundred thousand dollars we were one way or the other responsible for a loss up to five thousand dollars and for two of these policy years there are cold l r f years loss reserve fund years so the weight of the contract worked was advance how much based on our number of employees estimated future losses would be and we were required to fund as a reserve in advance multiple millions of dollars at any given time and it's in the nature of these workers comp claims t ay can last for many years into the future because there is latent injuries and even close cases can be reopened so we understand it zurich wants to have a reserve there and cirque was to be protected but the point is and the record is clear there is no ambiguity on why is it no it's looks to me like it's no different than any other service provider or creditor sending a bill to your client that says you as of january st let's use that as a hypothetical date two thousand  fifteen you owe us x one million dollars and it's no tim it could be four in this case last reserves it could be for services rendered in the calendar year two thousand and fourteen it could be for anything it's still doing payable it states it's no different than a bill security is not a present right to a claimant and the contract here as i've cited says that we are allowed to hold these funds in reserve to apply to future plans so my my my fundamental legal point my the noble review legal point is that the bankruptcy court double dip her award why because the bankruptcy code does two things it accelerates all future claims it accelerates all rights and says ok what is the amount presently due and payable and then it also defines a claim as a right to the payments you don't need three million dollars again no disputed fact those are reserve funds to be held in the future we get them back your honor if magically none of these employees have any future losses which obviously is an absurdity we get them back so the so we had a battle of the experts we had a full blown trial on what are the future losses in other words i'm judge i'm going to join again i know what the losses are are as of today we i'm interested in what are the losses in the future which because the bankruptcy court accelerates that i must now liquidate i can wait and every year come back and say i'm going to add a little bit here take a little bit there so let's have that battle of the experts and she accepts my experts mr told woman's conclusion that the future losses are one million seven hundred thousand dollars well then what she intended to do i believe was to say ok we have x for the past we're adding why for the future she didn't understand or see she made a mistake i believe which i had no ability to bring back to her attention later for reasons that i can explain she didn't understand that that plain confirmation that chapter eleven plan confirmation at the same time was a combined trial and it was very important for us to get out of bankruptcy fast to confirm a client because of course we have customers and clients to the don't like us being a bankruptcy so so because we had a unified trial and we had to get the confirmation we couldn't just wait another six months by following the motion to reconsider its service so we made a decision that i don't think i respect you want to question but i don't think that we should be penalized by by for going a there was no basis unless this court concludes that the bankruptcy court intended to award both sets but that's the point if the bankruptcy court intended to do that then into bankruptcy court violated section one hundred and fifteen dollars of the bankruptcy code which defines what a claimant and if we do look at the facts and this is all on page twenty seven dollars of my brief there were four hundred and thirty nine dollars claims ever opened the average claim paid out twenty six thousand dollars at the qualifies as such and that we should have remained so this is a situation where we must remain and i would i would urge every man yes your honor i'm not suggesting that the court render because we still need a liquidation in other words we still need to understand contract the plaintiff is owed a lifetime of medical payments in november of each year they estimate the following year i think i'm going to need ten thousand dollars and in physical therapy in ten thousand dollars in medical services likelihood that the employer will incur x moreover given the large number of employees there is another possibility that claims that we fought were closed would be reopened so i completely understand maybe using an injury is confusing exactly understand why my example is different than the worker's comp claims that are at issue in yours i'm trying to understand how your theory of five of two works because in you completely finish this question a promise and you can have time to answer it i'm not going to use up all your time it's ok in my hypothetical could come in under fifty dollars to see him ask for all of the future payments to be brought forward to net present value using some reasonable estimation of what this future payments would be and there's really two separate claims fi to be as to what you owe me and dreamy st and then fifty dollars to see as to everything that you would have otherwise paid me but for your bankruptcy lawyer and i hate to go bank lease on you i am a say ok i haven't tried your claim yet i'm going to give you for voting purposes a claim of x judges can and sometimes do in here did say ok i'm going to actually estimate a full ounce it's always a one a fifteen a question or the words as of the bankruptcy date what for all time or does it leave a table in the open if it leaves a table for the open then yes it must be estimated for present in a how is it any different the example i just gave you how is any different than the way that l r f works for your client it's not it's not if they're less than the r f we get the delta back of their more reliable may need to briefly address the i want you to have to rush and south each of you get three more minutes and you'll have three extra minutes as so we're not talking about voluntary payment that happened to payments that we made before we originally tried to get them discoursed we did not appeal that issue and we're not talking about a stall or ratification that's the twenty five percent savings contract we have that contract would have been appealed at issue the question is can you as a matter of law have a savings when the law up for bids you from paying anything more than that amount remember in the st instance zurich must pay to employees we don't and then the  zurich would never pay it out we would never have to reimburse her it so my argument is an exceedingly simple argument and if i lose on the argument so be it i have nothing more to add than that you cannot have a savings and savings is not defined in this contract you cannot have a savings when you're not otherwise obligated to pay them and on top of that zurich wrote this not even contract this proposal again please issues of voluntary payment issues of did not appeal them they do not apply we're not trying to get back the money as we paid also watch for other code words we're talking about a simple fee schedule review we're not talking about complex billing we're not concerned we're not contesting that i understand it's a large hurdle i understand but we are being asked for example zurich pays nothing on the bill because the bill is illegal under state law and we pay is worth twenty five thousand dollars that's unconscionable but my primary you please the court your honor trained received a fresh to the bankruptcy process he was able to reorganize and pursue its business unfortunately zurich is obligated on certain contracts for the next couple decades there are injured workers that will be paid by direct because they're the better fishers of these policies zork is simply seeking reimbursement for the losses associated with these insurance policies is that turn because the future losses have already been estimated and calculated for so why should why isn't it double dipping that is the central question in this case i'm happy to answer it  the answer is that a claim such as the one you mentioned the actual bill would not be for the one year's worth of twenty thousand dollars it would be for the lifetime so it's twenty thousand dollars times torne so say four hundred thousand that would be incurred loss this program is about and incurred loss programs that are paid loss programs paid loss in the st and nd years he's interested in nd and rd year himself st a th year were paid last nd and rd year were incurred loss and incurred loss is the loss that is incurred no known with some degree of  estimation by the claims handler twenty years at twenty thousand dollars each it is payable then and there once a year for that amount and then if somebody wants to come in and say trained and i do declare bankruptcy or buy out the contract you have to accelerate and you don't accelerate just one click you look at them all and you bring in an actuary and they build these triangles of losses both actuaries did this and they tweak up all of the claims it actually could go down a little bit but generally speaking it  tweaks they use something called an old d f and it depends on how much time has passed you look it's actually stipulated in the contracts which are in the record i can give you the cites and it'll give you the l d f level is about twenty three years and it's one hundred and fifty percent then it goes down one hundred and forty percent thirteen thousand one hundred and twenty one and down about eighty nine years and it's of like three percent that's the nd dip if you will and it's because of actuarial science losses develop over time things change even if you do it to all claims even ones that are closed and settled that's just how you  evaluate what the value is of this program it's their expert then guy you know gave a present value that right if he did and that was accepted by the court that's correct for future obligations under this contract the next twenty years worth of invoices that won't be printed if we waited twenty years they would print out and they would look like one dollar maybe a little higher maybe a little lower but we have to that we have to bring it current and then we have to look at the fact that before the fall of bankruptcy that impair invoices month after month year after year so we had all of those amounts to it how is it that we know then that there is no double dipping here because their expert didn't mention that they he had motive he had opportunity to say hey the amount i'm talking about here one  that's duplicative of amounts that are already existing in these printed invoices he didn't say that and there's a reason because it's not true that there are two different things that are being quantified and what's important is that it's characterized as an issue of law here if you read the opening statement the closing statement the pre hearing brief everything about the advocacy trial was that you have to add two pieces existing bills plus the actuarial estimates going forward do you recall what the printed bills were on the petition date i'm sorry say that again that's i asked in artfully how much was the with the printed bills that have been filed the petition date and the time of trial it's possible though that some of that five dollars came in there so if if if the theory of double dipping held then the one dollar they would actually be entitled to a refund basically right because the idea would be that the dollar should compensate for all of the future payments instead of the five seven we have to pick one of the others up is that the theory of the debt or your honor alaskan alaska i get a headache trying to figure it out it moves around all the time it there's no sense to it there is no double charging here the bankruptcy court was not confused the bankruptcy court took four days there were nine witnesses there were hundreds of exhibits three experts course the court received a master class in law sensitive insurance billing the parties had actuaries who had access to all the data and have extensive spreadsheets that reflect their numbers the invoices they stack up there's all detail down to the very penny each claim there's no evidence that there was even a single chart say five dollars fifty dollars five hundred dollars you name it on this invoice it's also in that expert report it just doesn't exist and it would exist if we had double dipping here counsel why is it such a large amount for the future losses that it would be if the bankruptcy court did intend to award for over four million six hundred thousand dollars for the future losses isn't that two hundred and ninety two thousand dollars plus per claim which is significantly more than what claims are normally worth and this is in the opposing counsel's brief can you address that place yes i  one seven that's the future number now i think he's adding that to three million and the three million are past due incurred last billings  as a four point six though those two are two different things the three million dollar l r f m billings are past due amounts they are liquidated they are known they are determined they do not need to be estimated i attached one as you know appendix because i wanted to you to see how detailed they are there was no estimating that needed to be done there was no actuarial science that needed to be done you didn't need to use filed to see to address that it was just an invoice for past due such as your honor suggested much like any other vendor would it's no you just look at it is this do or payable is it not doing payable what was separate is the one dollar that is that and so then why would it be so much for the future climes you've explained that you don't believe that's the right number you did you said you would answer it with that number will you answer it with that number place i want to be so much the answer is that you have a couple dozen claims that are going to be open or subject to reopening for the next several possibly decades you have injured workers at eight hundred thousand one hundred and twenty some employers that's who trained essentially distributed zurich's insurance to in its p e o business model thousands of employees but you're talking about a couple one hundred claims that those claims are valued at a one thousand percent more than the other claims that historically been you know i'm sorry i'm i'm reading from the brief so it appears i mean this should be something you're ready to get lined exactly why it's wrong because you knew this was coming and i am and there's no support for that but the reason that's why i'm incredulous like i mean it's in there so it's not surprising i'd ask about it i understand you're o n your honor there you have to look at the one dollar in relation to the sixteen million dollars overall this was a four year program the total losses were sixteen dollars that's what michael hayden and mr lawson testified to the one seven is actually not that large in comparison to the historical losses on this program considering that it's going to be alive for the next couple of decades it's also a function of the fact that when you're looking at it the program under the program and the reserves it's a reserve amount so it's the same issue about double dipping respectfully your honor does not entirely a reserve amount if you look at the appendix you'll see that the line amount i'm sorry how much do you think it is if you don't believe the whole thing is reserve preposition and paid reserves how much do you think was prepared to shoot and unpaid reserves if i can direct your attention to say page nine of twenty seven if you have exhibit i can see their individual claims listed on this page and you see that the left column lists paid and it divides it between losses and elite which are just mean expenses which is basically the costs of a case reserves they are incurred they have not yet been paid to a doctor say if a person is known to have a need for a nice surgery they might put say fifty thousand dollars on reserve but the surgery might be two months in advance  months in into the future that doesn't mean it's not due and payable then and there because that's how the program was structured it's all about cash flow benefits sometimes they wait for a paid program and sometimes they went for an incurred loss program and they have different financing and best attributes to them i mean ultimately this is a it's largely self insurance and zurich is a financier of its customers business zurich is the one who writes the checks if there's only a risk transfer for the very largest of claims zurich's going out of pocket and then needs to be reimbursed for things below five hundred thousand so the in the structure of an incurred loss program is such that the incurred losses are pailful once a year the court is interested i will turn to the nd issue in the case which is about the medical cost containment the previous previous argument  focused on the issue of whether or not there are savings associated with one aspect of the larger process called a bill review or medical cost containment or a complex bill review many names for the same topic which is you have hundreds of workers with all these medical bills we've all we live with it in our individual lives right you get these explanation of benefits so she did with health care services and you have to look at it and figure out did they charge me for the right thing no different than going to a restaurant and seeing whether or not there's an extra order of french fries on the bill somebody has to look at those bills and police them somebody has to make sure that the right charges be in charge of the right person and the right scheduling of costs that doesn't happen by itself yes there are rules that govern both providers and what they're supposed to bill and there are rules governing insurance companies as what they're supposed to pay but though those rules need to be monitored and they need to be managed in zurich has spent a massive amount of money setting up an entire operation that takes in this information and will then have a interact with the patients make sure they get the medical care and look at the bills and make sure that the right amount is being paid and they had what's called again sharing arrangement or a shared savings model where trend would keep seventy five percent of savings comp zurich's efforts at policing these bills and zurich would keep twenty five percent there's nothing wrong with this it was disclosed that brokers testimony at trial testified that he was aware of it it's in the written materials the proposals that are bio and it is mentioned as in the definition of a l eighty the last adjustment expense in both the program agreements and the underlying policies and it was described in at least an annual publication that went to the insurer the insurance broker that would then describe the medical cost containment program so that there's a suggestion that it's unconscionable but it's actually consistent with industry standard josep due to an expert in medical cost containment testified at trial that in his experience as an expert in the medical cost containment industry it was industry standard to charge twenty five percent of savings as the metric for valuing this service there are certainly are other ways to charge for this service you could do it in perf own call per bill  per day per month but they chose a what's called the contingency fee arrangement twenty five percent of savings there's nothing unconscionable about it and you address the straight up argument not the untouchability argument but that because it doesn't reduce liability it's not actually a savings it does reduce liability your honor of that this is the argument that opposing counsel makes that it doesn't reduce liability because they never have to pay and you never have your client know that you never pay more than the stated and so it doesn't have any practical effect and because it doesn't use liability it's not a savings explain why that's wrong honor is wrong because the savings doesn't materialize unless there's effort unless there is knowledge unless there are systems processes and technologies they think tear life if you never have to pay more than the rate anyway because hundreds of bills come in the door they all have numbers on them and they would get paid on less someone spends time and energy and uses knowledge and computer systems to figure out which ones are wrong which ones are too high which ones didn't comply with this regulation or that regulation it's fifty states worth of bills management incoming bills to  make at the right right that's correct right rate right person right yes service write code number and that's what we do and one of the attributes they're looking for is is it consistent with never ask or colorados or arkansas's fee schedule they have limits and so when we when those are identified yes they are identified flagged you call the provider and they say oh sorry we screwed up so i will fix that bill and send you another one i would and make sure that they are paid an appropriate amount that minimizes both the costs for the largely self insured employer and make sure medical providers get paid and make sure the injured workers get medical care that they need it is an extensive and impressive operation that zurich runs they didn't have to use or they could have outsourced this to somebody else and somebody else would have likely charge them the industry standard rate twenty case was adjudicated by judge jernigan in a pay truly impressive manner we were asked to do something very challenging which was complete discovery get expert reports conducted for a trial with nine dollars witnesses in a matter of sixty days and we got it done jury again took a great deal of time and care and was not confused in any way the amount of the allowed claim roughly seven million six hundred thousand dollars deserves to be affirmed in its entirety just like it was affirmed at the district court level because it was correct moreover the real issue is whether or not it was clearly erroneous with respect to the filed to be determination or an abuse of discretion with respect to the five o two c and it was neither there is a substantial amount of evidence in the record i would be happy to discuss it further place my time is up and i ask you for you medical cost issue this and this is an easy issue for me to respond to because all you heard counsel say was well the cost of sorich money to implement that program sure it does that's the cost of doing insurance complying with the law that's why sort of bil circle never paid anything more out than the law requires and watch also the word games there are instances where there are savings there are instances when sir calls the hospital and says hey let's let's agree on bulk pricing  being millions and millions of dollars that's unconscionable and it's not a forcible now to answer your question judge oldham and i think judge all rod i'll get it also answer your question all you have to look at his tapes six of my record excerpts these are desert cla deductible these are the ones where we pay in arrears where the numbers are known no problem we old elves would never try to so we don't know those then includes the three million dollars of l r s the last retro fund which is for future buildings so how do we get fine we don't need to go into debt the bankruptcy court rejected that methodology the bank of chips the court rejected his sixteen million dollars whatever it was the bankruptcy court said futures are one seven it's very simple you look at what were the  trial they're known with mathematical certainty and you had one seven that's what and if you really need to step back and think about it or if i can be logical more than anything we ended up paying zurich over time about ten million dollars