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Mar. 15, 2008
Copyright © Las Vegas Review-Journal

PUBLIC HEALTH CRISIS: Closed clinic may be underinsured

So far, only $3 million in coverage found at Endoscopy Center

By JENNIFER ROBISON
©
2008 REVIEW-JOURNAL

Hepatitis C Investigation

Nevada Mutual Insurance Company is at 709 Shadow Lane, across the street from Dipak Desai's practice at 700 Shadow Lane. Desai was on the board of directors of Nevada Mutual, which insured his clinic, the Endoscopy Center of Southern Nevada.
Photo by Jeff Scheid.

They have plaintiffs. They have defendants. But attorneys say they might also have trouble finding insurance money to cover the claims resulting from a hepatitis outbreak at a local clinic.

Attorneys say they're still tracking down all the liability insurance in the case, but for now, they've uncovered just $3 million in malpractice-insurance coverage at the Endoscopy Center of Southern Nevada, where as many as 40,000 locals were at risk of exposure to hepatitis B, hepatitis C and HIV.

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That payout comes to $75 per affected patient -- not even enough to cover the cost of hepatitis and HIV tests, said local trial attorney Robert Eglet, a senior partner in the law firm of Mainor Eglet Cottle.

The tests typically run $275 or so, though several local labs have dropped prices on blood work for patients ensnared in the health alert.

What's worse, some attorneys say, is that Dr. Dipak Desai, majority owner of the endoscopy clinic, served on the board of directors of the doctor-owned insurance company that covered his center. They worry that the post could have given Desai a hand in controlling payouts on claims against the business.

"It's interesting that (Desai) is on both sides of this controversy," said Richard Harris, managing partner of the Richard Harris Law Firm in Las Vegas. "He's the target of the action, yet he's a director of the insurance company that will determine who's going to get paid."

Eglet included the company, Nevada Mutual Insurance Co., in a class-action lawsuit he filed Monday. He's alleging that Desai, as a board member, was regulating himself and other defendants in the Endoscopy Center case.

But the insurer's co-founder said trial attorneys' implications about Desai's role in determining insurance coverage are "absolutely inaccurate."

"It's not only not fair, but it's irresponsible," said Chip Wallace, co-founder of Nevada Mutual.

The insurer's policies prohibit the board's involvement in underwriting or claims management, Wallace said. Because the mutual insurer is doctor-owned, it's important to have some doctors among the company's seven directors, he said.

Desai resigned from the insurer's board about two weeks ago, Wallace said.

Wallace declined to discuss the insurance policies that cover Desai's various clinics and consulting practices because the company is still determining what it can legally reveal publicly. He's planning a news conference next week to discuss the matter once "we figure out what we can say, and what information is proprietary to the insurers."

Daniel Curriden, the attorney representing Nevada Mutual, didn't return a call before deadline seeking comment on the coverage his client offered Desai.

What attorneys have learned thus far is that the Endoscopy Center of Southern Nevada has a $1 million/$3 million liability policy. That means the insurer won't pay out more than $1 million per claim, or more than $3 million for all claims made in 2008, Harris said.

Harris said he's "hopeful" that the doctors who performed procedures at the endoscopy clinic also carry their own liability insurance.

Investigators are still trying to determine how many physicians practiced at the center; Desai's consulting practice, the Gastroenterology Center of Nevada, had 14 physicians, but some of those doctors might not have worked out of the Shadow Lane clinic. Desai also co-owned two other endoscopy clinics: Spanish Hills Surgical Center on Rainbow Boulevard and Desert Shadow Endoscopy Center on Burnham Avenue.

Doctors typically carry individual liability policies of $1 million/$1 million to $1 million/$3 million, Harris said. The nurse anesthetists who administer sedatives during endoscopies will also generally take out liability insurance in similar measures. Until investigators identify the specific physicians and nurse anesthetists based at the center, though, it'll be tough to pin down specific payouts.

Representatives of the Nevada Division of Insurance didn't return a call before press time inquiring about legal requirements for liability insurance.

Attorneys will look for umbrella policies that add a layer to liability coverage. If they turn up just $3 million in total coverage for the center, that would mean the clinic was "woefully underinsured," Eglet said.

Liability insurance should account in part for the volume of patients a practice sees. And given the volume of the Endoscopy Center's business -- insiders have said the two-bed clinic was performing 50 to 60 endoscopies and colonoscopies a day -- $3 million wouldn't likely be enough.

"Just one of these (hepatitis C) cases is worth more than $3 million," Eglet said.

"You don't give a commercial truck driver driving eight to 12 hours a day on freeways a $15,000 policy," he added. "You just don't do that. You take the risk into consideration."

Nor would $3 million in total payouts come close to covering potential damages in the class-action case that's brewing in local courts.

A 2001 case in Nebraska, where 612 patients at a cancer clinic were exposed to hepatitis C and 99 patients contracted the disease, resulted in about $30 million in damages, Harris estimated.

Attorneys agree there's nothing wrong in principle with Desai belonging to Nevada Mutual.

Nevada Mutual launched in 2002 after a malpractice-insurance shortage that saw liability coverage dry up as major third-party insurers left the state to avoid big losses.

When those insurers abandoned Nevada, Harris said, doctors were "in a bind" for liability coverage.

Nevada Mutual "did fill a gap," Wallace said.

"It was a grass-roots effort responding to the medical-malpractice crisis," he said.

Today, Nevada Mutual covers 1,500 of Nevada's 4,200 physicians. The insurer's members all own a piece of the not-for-profit company, which yielded its first dividend in 2007.

Both Eglet and Harris said Desai's position as a director of Nevada Mutual was akin to "the fox guarding the henhouse."

"It's contrasting the idea of your own insurance company, coupled with tort reform, where they cut the ability of victims to be compensated and cut attorneys' fees in half so no one would take these cases," Harris said. "It created sort of a captive market."

Attorneys plan to break free of those limits.

Eglet will attempt to cover the difference between insurance coverage and damages by drawing state agencies into his class action. The agencies responsible for monitoring practices at local clinics didn't inspect the Endoscopy Center within the time frames the law requires, he's alleging. The amount plaintiffs can recover from a government agency in a liability case is capped at $75,000 per person.

If that's not enough, attorneys may chase private property belonging to doctors and nurse anesthetists involved in the case.

"It's a concern to us that there's going to be sufficient funds to cover our clients' needs," Eglet said. "We're looking at every single culpable party there is. Quite frankly, I think when it's said and done, this is a situation where it's going to take more than just insurance to cover these losses. There's going to be some looking into personal assets."

Eglet declined to speculate on the worth of personal assets that might be available in the case.

Examples of sizable assets might include the $3.2 million, 8,724-square-foot home Desai owns in Red Rock Country Club. Through various trusts and partnerships, Desai also owns a one-quarter-acre vacant lot downtown, near 4th Street and Garces Avenue, valued at $1.6 million, and a 3,568-square-foot Anthem home worth $562,000.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or (702) 380-4512.