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Excess Carrier May Sue Primary Carrier for Failure to Settle Within Policy Limit

John Franco was working on a film set when a special effects accident caused him to suffer serious injuries. Franco’s injuries included pelvic crush injuries, a broken hip, fractures to both femurs, crush injuries to both knees, broken tibias and fibulas, broken ribs, a punctured lung, and soft tissue injuries to his face.

His employer had two primary insurance policies with Fireman’s Fund Insurance Company, and an excess insurance policy with Ace American Insurance Company. The injured worker sued, Fireman’s Fund defended the case, and the case eventually settled with the participation of and contributions from both insurers.

Fireman’s Fund defended the Warner Brothers entities in the Francos’ lawsuit. The Francos made settlement demands within the limits of the Fireman’s Fund policies. According to Ace American’s complaints, the demands were reasonable and supported by substantial evidence, but Fireman’s Fund “failed and/or refused to pay those demands within [the insurance policies’] limits.” Ultimately the Francos settled their lawsuit – for an amount substantially in excess” of the limits of the Fireman’s Fund policies. According to Ace American, Fireman’s Fund “consented to the settlement and contributed to it”, and Ace American contributed the amounts in excess of the Fireman’s Fund policies’ limits. Following the settlement, the case was dismissed with prejudice.

Ace American then sued Fireman’s Fund for equitable subrogation, alleging that the injured worker initially offered to settle his case within the limits of the Fireman’s Fund policies, and that Fireman’s Fund unreasonably rejected those settlement offers. Ace American alleged that as a result, it was required to contribute to the eventual settlement, which exceeded the limits of the Fireman’s Fund policies.

Fireman’s Fund demurred, arguing that the rights of an excess insurer such as Ace American derive from the rights of the insured, Warner Brothers. As such, an excess insurer may only sue for equitable subrogation if there has been a judgment against the insured that exceeds the limits of the primary policy. Because the Franco lawsuit settled and there was no judgment against Warner Brothers, Fireman’s Fund argued, Ace American could not sue for equitable subrogation. The trial court sustained the demurrer without leave to amend and dismissed the case, and Ace American appealed.

On appeal the question presented is whether Ace American has stated viable causes of action for equitable subrogation and breach of the duty of good faith and fair dealing, or whether the lack of a judgment in the employment injury case bars Ace American’s claims. The court of appeal reversed the dismissal in the published case of Ace American Insurance v Firemans Fund.

There are conflicting decisions from different divisions of the Second District court of appeal on this issue. In Fortman, supra, 221 Cal.App.3d 1394, Division One held that an equitable subrogation action could proceed against a primary insurer that initially breached its duty to settle a case within policy limits, resulting in a settlement that exceeded policy limits. By contrast, in RLI, supra, 141 Cal.App.4th 75, Division Five held that an equitable subrogation action could not proceed under the same circumstances.

The question is whether Ace American has stated viable causes of action for equitable subrogation and breach of the duty of good faith and fair dealing, or whether the lack of a judgment in the employment injury case bars Ace American’s claims.

This division of the Second District Court of Appeal found that because Ace American, the excess insurer, alleged it was required to contribute to the settlement of the underlying case due to the primary insurer’s failure to reasonably settle the case within policy limits, the lack of an excess judgment against the insured in the underlying case does not bar an action for equitable subrogation and breach of the duty of good faith and fair dealing.

Researchers Partially Reverse Paralysis

Paraplegic patients recovered partial control and feeling in their limbs after training to use a variety of brain-machine interface technologies, according to new research published on in the journal “Scientific Reports” and reported by Reuters Health.

The researchers followed eight patients paralyzed by spinal cord injuries as they adapted to the use of the technologies, which convert brain activity into electric signals that power devices such as exoskeletons and robotic arms.  

Between January and December 2014, the patients used virtual reality scenarios and simulated tactile feedback exercises to train their minds.

“To our big surprise, what we noticed is that long-term training with brain-machine interfaces triggers a partial neurological recovery,” said Dr. Miguel Nicolelis, a professor of neuroscience and biomedical engineering at Duke University, according to a statement from Duke.

“What we didn’t expect and what we observed is that some of these patients regained voluntary control of muscles in the legs below the level of the lesion and regained sensitivity below the level of the spinal cord injury,” Nicolelis said.

The researchers believe that the training in effect rewired the circuitry in the brain, giving it new ways to communicate with parts of the injured body.

“We may actually have triggered a plastic reorganization in the cortex by re-inserting a representation of lower limbs and locomotion in the cortex,” Nicolelis said.

“These patients may have been able to transmit some of this information from the cortex through the spinal cord, through these very few nerves that may have survived the original trauma. It’s almost like we turned them on again,” Nicolelis said.  

“It is very encouraging,” Dr. Ron Frostig, a professor of neurobiology and behavior at the University of California, Irvine, said in an interview.

“It shows that not only can we train them to use their thinking to activate something to help them like a robotic arm, but now we can improve their situation even further.”

Three Popular Orthopedic Surgeries are Actually “Useless”

Before a drug can be marketed, it has to go through rigorous testing to show it is safe and effective. Surgery is different. The Food and Drug Administration does not regulate surgical procedures.

So what happens when an operation is subjected to and fails the ultimate test – a clinical trial in which patients are randomly assigned to have it or not?

Spinal fusion is an operation that welds together adjacent vertebrae to relieve back pain from worn-out discs. Unlike most operations, it actually was tested in four clinical trials. The conclusion: Surgery was no better than alternative nonsurgical treatments, like supervised exercise and therapy to help patients deal with their fear of back pain. In both groups, the pain usually diminished or went away.

The studies were completed by the early 2000s and should have been enough to greatly limit or stop the surgery, says Dr. Richard Deyo, professor of evidence-based medicine at the Oregon Health and Sciences University. But that did not happen,according to an article in the New York Times. Instead, spinal fusion rates increased – the clinical trials had little effect.

Spinal fusion rates continued to soar in the United States until 2012, shortly after Blue Cross of North Carolina said it would no longer pay and some other insurers followed suit. “It may be that financial disincentives accomplished something that scientific evidence alone didn’t,” Dr. Deyo said.

Other operations continue to be reimbursed, despite clinical trials that cast doubt on their effectiveness.

In 2009, the prestigious New England Journal of Medicine published results of separate clinical trials on a popular back operation, vertebroplasty, comparing it to a sham procedure. They found that there was no benefit – pain relief was the same in both groups. Yet it and a similar operation, Kyphoplasty, in which doctors inject a sort of cement into the spine to shore it up, continue to be performed.

Dr. David Kallmes of the Mayo Clinic, an author of the vertebroplasty paper, said he thought doctors continued to do the operations because insurers pay and because doctors remember their own patients who seemed better afterward.

The latest controversy – and the operation that arguably has been studied the most in randomized clinical trials – is surgery for a torn meniscus, a sliver of cartilage that acts as a shock absorber in the knee. It’s a condition that often afflicts middle-aged and older people, simply as a consequence of degeneration that can occur with age and often accompanying osteoarthritis. The result can be a painful, swollen knee. Sometimes the knee can feel as if it catches or locks. So why not do an operation to trim or repair the torn tissue?

About 400,000 middle-aged and older Americans a year have meniscus surgery. And here is where it gets interesting. Orthopedists wondered if the operation made sense because they realized there was not even a clear relationship between knee pain and meniscus tears. When they did M.R.I. scans on knees of middle-aged people, they often saw meniscus tears in people who had no pain. And those who said their knee hurt tended to have osteoarthritis, which could be the real reason for their pain.

Added to that complication, said Dr. Jeffrey N. Katz, a professor of medicine and orthopedic surgery at Harvard Medical School, is the fact that not everyone improves after the surgery. “It is not regarded as a slam-dunk,” he said. As a result, he said, many doctors have been genuinely uncertain about which is better – exercise and physical therapy or surgery. That, in fact, was what led Dr. Katz and his colleagues to conduct a clinical trial comparing surgery with physical therapy in middle-aged people with a torn meniscus and knee pain.

The result: The surgery offered little to most who had it. Other studies came to the same conclusion, and so did a meta-analysis published last year of nine clinical trials testing the surgery. Patients tended to report less pain – but patients reported less pain no matter what the treatment, even fake surgery.

Then came yet another study, published on July 20 in The British Medical Journal. It compared the operation to exercise in patients who did not have osteoarthritis but had knee pain and meniscus tears. Once again, the surgery offered no additional benefit.

An accompanying editorial came to a scathing conclusion: The surgery is “a highly questionable practice without supporting evidence of even moderate quality,” adding, “Good evidence has been widely ignored.”

CastlePoint Conservation and Liquidation Plan Hearing Set for September

In what the Insurance Journal called a “success” Bermuda-based CastlePoint Holdings, Ltd. held its initial public offering of 7,682,238 common shares on March 23, 2007. The Company sold 7,562,738 shares and existing shareholders sold 119,500 shares at $14.50 per share. The IPO raised approximately $111 million. The New York-based Tower Group Inc. entered into a “strategic relationship” with CastlePoint in 2006. It became the sole shareholder of its subsidiary CastlePoint Re in February after it invested $15 million in the Company. Tower also has an 8.6 percent stake in CastlePoint.

Tower was made up of 10 insurance companies domiciled in six states that operated on a largely consolidated financial basis through an intercompany reinsurance pooling arrangement. Tower wrote workers’ compensation business in California through Tower Insurance Company of New York, CastlePoint National Insurance Company, and Preserver Insurance Company.

Well things change.

The Tower Group’s troubles started emerging during 2013 when it announced that it had deficiencies of nearly $400 million in its aggregate policyholder loss reserves. That situation was compounded by accounting errors that resulted in the parent company, Tower Group withdrawing its previously filed consolidated financial statements for 2011 and 2012.

In September 2014, the Tower Group was acquired by ACP Re, a Bermuda reinsurer with ownership aligned with AmTrust Financial Services Inc. and National General Holdings Corp. While that acquisition substantially improved Tower’s situation by migrating policy and claims administration to more reliable data systems at AmTrust and National General, the volatility and deterioration of the pre-acquisition claims continued unabated through 2015.

By the end of 2015, the Tower Group reported additional loss reserve deficiencies well above $400 million.

During the past several weeks, the California Department of Insurance in close coordination with fellow regulators in Maine, Massachusetts, New Jersey, Florida, and New York, formed a plan with the owners of ACP Re and other related parties to consolidate the entire Tower Group into a single company, CastlePoint National Insurance Co., a California domiciled insurer, so policyholders of the entire Tower Group of insurance companies could be protected in single legal proceedings here in California.

Insurance Commissioner Dave Jones announced at the end of July that CastlePoint National Insurance Company, the sole remaining insurance company member of the Tower Group, was placed into conservation by order of the San Francisco Superior Court to protect policyholders and injured workers covered under policies issued by CastlePoint and the other member companies of the Tower Group.

Immediately after being appointed Conservator of CastlePoint, the Commissioner filed a motion seeking approval of a Conservation & Liquidation Plan for CastlePoint to further protect policyholders by deconsolidating CastlePoint from the Tower Group and providing for transactions that will bring in more than $200 million in new value for the benefit of policyholders and claimants.

The hearing on the motion to approve the Plan is set for 9:30 a.m., on Tuesday, September 13, 2016, at the San Francisco Superior Court.

Global Pressure Urges Drug Pricing Based on Outcomes

Global pressure on health spending is forcing the $1 trillion-a-year pharmaceutical industry to look for new ways to price its products – charging based on how much they improve patients’ health, rather than how many pills or vials are sold.

And according to the article in Reuters Health, some experiments in pricing have already been made.

But shifting the overall industry to a new model requires improvements in data collection and a change in thinking, say drug pricing experts. “Eventually, we are going to get there,” said Kurt Kessler, managing principal at ZS Associates in Zurich, which advises companies on sales and marketing strategies. “But it is a long, tough slog because it’s difficult to get the right data and agree on what the right outcomes are to measure.”

In the past, governments and insurers made room in their budgets for new drugs by switching to cheap generics as patents expired on older drugs. But today generics already account for nearly nine out of every 10 prescriptions in key markets like the United States, and fewer big drugs are going off patent.

That leaves little headroom for pricey new medicines even as they come to market in growing numbers. The U.S. Food and Drug Administration has already approved 16 new drugs this year.

Investors got a wake-up call on the issue last recently when $10 billion was lopped off the market value of Novo Nordisk as the world’s biggest diabetes firm warned of falling U.S. prices.

Pharmacy benefit managers administering U.S. health plans are pushing back hard by excluding some drugs deemed too expensive – including Novo’s – leading to a crunch in areas like diabetes, a disease that now accounts for 12 percent of global healthcare spending.

The Danish group has an unusually high exposure to the U.S. market, but it is not alone in signaling tough times ahead.

The chief executives of Novartis, Eli Lilly and GlaxoSmithKline have all warned recently that pricing will become increasingly challenging across the board.

Accounting for 40 percent of global drug sales, the fate of the U.S. market is front and center in the minds of drug company executives, some of whom privately admit to preparing for a “confrontational” period in relations with politicians.

Novartis CEO Joe Jimenez believes drugmakers must develop value-for-money pricing models, like the performance-based deal the Swiss drugmaker recently struck with two U.S. insurers for its new heart failure drug. Under that deal, payments for Novartis’ Entresto pill are to be calculated in future based on the proven reduction in the proportion of the insurers’ patients admitted to hospital for heart failure, not on the number of pills they consume.

The aim is a flexible pricing system that rebates healthcare providers when a drug doesn’t work as planned and charges more when it works well.

Europe is in the vanguard of such moves. Britain agreed an early performance-based deal for a Johnson & Johnson (JNJ.N) blood cancer drug back in 2007 and Italy also uses patient data to pay for cancer drugs based on actual patient responses.

GSK CEO Andrew Witty sees this outcomes-based approach slowly becoming the norm in more disease areas and geographies. “Whoever wins the election in the U.S., and also in Europe, we will see those conversations play out over the next few years,” he told Reuters. “I am not particularly expecting anything dramatic in 2017. I would say it is worth keeping an eye open for evolution of change, probably in ’18 and ’19.”

The pharmaceutical industry’s European trade association is already discussing ways to shift to outcomes pricing, following price curbs in Germany that have caused some companies to pull products off the market, and effective rationing in Britain, where strict cost-effectiveness rules apply.

Authorities in Asia’s two biggest markets, China and Japan, are also intervening in new ways to cap runaway costs.

Wearable Technology May Be Employee Health “Game Changer”

Wearable technology is a category of technology devices that can be worn by an individual to collect tracking information related to health and fitness. Some wearables have small motion sensors to report data back to the user. Today, many wearable devices are embedded in jewelry, clothing, shoes, bionic suits and smart helmets. These wearables use sophisticated biosensors to track metrics such as physical activity, heart rate, fatigue, stress and mood.

Wearables may be one of the fastest growing technology sectors, predicted to hit $10 billion annually within the next three years. And according to an article in Property Casualty 360, they’re poised to become a trend in the management of injured workers. And the workers’ compensation industry is staking a claim in wearable technology.

Employers and payers already are adopting wearable technology in the workplace to reduce costs and improve safety and productivity through injury prevention and recovery. Applications can range from tracking locations to reduce the risk of injury in unsafe areas, to monitoring posture and compliance with ergonomic use of equipment, to using smart wheelchairs and exoskeletons to improve and restore mobility.

The RIMS 2016 presentation, “The New Game Changer in Managing Worksite Health: Wearable Technology,” identified four main categories of wearable technology with significant potential for workers’ compensation.

1) Postural Devices: The use of postural devices in the workplace is intended to positively remind employees to be aware of their posture throughout the day. Workers are sent an alert if they repeatedly slouch or deviate from an ergonomically correct position. This assistive technology benefits employees by reminding them to stretch or adjust periodically while also helping to prevent ergonomic-related workers’ compensation claims.

2) Activity Trackers: If a physical therapist has recommended physical activities such as daily walks to rebuild muscle strength, the case manager can track the degree of activity of that injured worker. If the tracking device records lower physical activity levels than prescribed, intervention and counseling can take place to improve compliance or develop a different treatment plan.

3) Exoskeletons: Injured workers such as paraplegics, amputees, and individuals with disabilities that include gait impediments can reclaim a part of their lives they thought was lost forever: walking. Recently approved by the FDA, Indego exoskeletons hold the potential to transform recovery in workers’ compensation claims by expanding the injured worker’s environment and level of independence, as well as increasing productivity and reducing the need for in-home care and other assistive devices.

4) Location trackers. In industries such as construction and mining, location trackers are an effective tool for injury prevention along with employee communication. From a prevention perspective, trackers can be set up to alert employers when workers enter unsafe areas. From a communications perspective, trackers allow employers to locate their employees in the event of an emergency for evacuation purposes. In addition, employees who are in danger can have a panic button feature that lets supervisors know immediately that they need help while transmitting their location.

Wearables are already beginning to improve the way workers’ compensation injuries are managed and prevented, getting injured workers healthy and back on the job quickly and safely. Although the industry is currently in the “early adopter” stage of incorporating wearables into its tool kit, we can expect to see considerable transformation in medical management and case management within the next several years.

9,000 Companies Left California in Last Seven Years

Between 2008 and 2015 at least 9,000 companies have left California for a better business environment, according to the 378 page study by Spectrum Location Solutions titled, California’s Forty Year Legacy of Hostility to Business.

Joseph Vranich, president of site selection consultants Spectrum Location Solutions (VLS) in Irvine, places the blame on the Golden State’s “hostile” business environment.

The 2015 Chief Executive Magazine annual survey of business climates was completed by 511 CEOs across the U.S.  States were measured across three key categories to achieve their overall ranking: Taxes and regulations, quality of the workforce, and living environment, which includes such considerations as quality of education, cost of living, affordable housing, social amenities and crime rates.

For the 11th year in a row, Chief Executive Magazine found California to be the “worst state for business in 2015.” This placement is not “near the worst” but actually “THE WORST” ranked as 50 out of 50, the lowest rank possible for each of 11 years. CEO’s comments include: “California could hardly do more to discourage business if that was the goal.” “The state regulates and taxes companies unreasonably.” “California is getting worse, if that is even possible.”

But despite the growing anti-business environment, California’s economy grew for decades due to wonderful scenery and climate, a workforce with technical expertise, and trade access to Asian nations.

But since the start of the Great Recession and accelerating after Brown’s election as governor in 2009, a mass exodus of businesses from the not-so-Golden State to more “friendly” locations like Texas and Nevada occurred.

Between 2011 and 2012, Bureau of Labor Statistics data compiled by Bloomberg News indicated that California lost ground in a related category: the number of business establishments: “There were 1.3 million businesses in California at the end of 2012, 5.2 percent fewer than in the previous year (that’s about 73,000 fewer).” Florida, another state hard hit by the bursting of the real estate bubble, and the state with the second most businesses, added new businesses at the nation’s seventh-fastest rate.

The top 10 states that California businesses have relocated to over the last seven years are in the following order: (1) Texas; (2) Nevada; (3) Arizona; (4) Colorado; (5) Washington; (6) Oregon; (7) North Carolina; (8) Florida; (9) Georgia; and (10) Virginia.

Los Angeles was at the top of the list of the 10 California counties that suffered the highest number of disinvestment events. L.A. was followed by: (2) Orange, (3) Santa Clara, (4) San Francisco, (5) San Diego, (6) Alameda, (7) San Mateo, (8) Ventura, (9) Sacramento, and (10) Riverside counties.

The Report claims that the California government has a “dismissive attitude toward any suggestion that California has become economically uncompetitive.” One example in 2014 when Toyota Motor Corp. announced it will move its Torrance headquarters to Plano, Texas, Gov. Brown revealed his aloofness towards business challenges by saying, “We’ve got a few problems, we have lots of little burdens and regulations and taxes, but smart people figure out how to make it.”

The Wall Street Journal came back with this: “California’s problem is that smart people have figured out they can make it better elsewhere.”

Another example of concerns is evident in a comment by Ehsan Gharatappeh, Chief Executive Officer of CellPoint Corp. of Costa Mesa. In early 2015, when launching a new facility in Fort Worth, he said in testimony in Sacramento “Even if California were to eliminate the state income taxes tomorrow, that still would not be enough to put my manufacturing operations back in California.”

The Report concludes that “business interests have provided an encyclopedic accounting of California’s difficult environment to Gov. Brown and the Legislature to no avail.” Well, SB 863 made workers’ compensation a little bit less costly. But in the big scheme of things will it make any difference and stop dsinvestment in California?

Sex Offender-Former Physician Caught Working at Valley Clinic

A 47-year-old man who had his doctor’s license revoked after being convicted in 2013 of sexually abusing a patient at a Northridge hospital is alleged to have violated the terms of his probation by continuing to perform medical exams.

In 1998, the Medical Board of California issued a Physician’s and Surgeon’s Certificate to Kevin Pezeshki, M.D. He was a 1995 graduate of the University of Southern California Keck School of Medicine.

On May 24, 2013, in the case of The People of the State of California v. Kevin Pezeshki, Los Angeles County Superior Court case number LA071845 he was charged with three counts of sexual penetration by a foreign object against victims Carmen C. and Cindy T., and three counts of sexual battery by fraud against both victims, all violations of the Penal Code.

Deputy District Attorney Rena Durrant said Pezeshki pleaded no contest on Sept. 11, 2013, to one felony count of sexual battery by fraud. Pezeshki was then sentenced to three years formal probation, a year of counseling and lifetime sexual offender registration.

After his conviction, the Medical Board of California filed an accusation against him for the purposes of revoking his medical certificate. Based upon his stipulated surrender of his license, it was revoked as of March 21, 2014.

Now Pezenshki is again in trouble with the law.

Los Angeles County Superior Court Judge Gregory Dohi revoked Pezeshki’s probation on June 27 based on allegations that the defendant performed an ultrasound on a female patient although he no longer has a medical license, the prosecutor said. The defendant also is reported to have conducted an ultrasound on another woman, the prosecutor added.

The two pregnant women who allegedly received the ultrasound examinations were patients at Saint Joseph Medical Clinic in Panorama City.

If found in violation of probation, Pezeshki could face up to four years in state prison. The probation revocation hearing is underway in the Van Nuys Superior Court.

Final Chapter on Ex-Senator Leland Yee Corruption Case

Former State Senator Leland Yee was indicted for corruption in office which included a 2013 incident in which Yee allegedly agreed to take $60,000 — which he believed was coming from a National Football League team owner — in exchange for his and another senator’s vote on a bill dealing with workers’ compensation insurance for pro athletes. Last February Yee was sentenced to five years in federal prison following his guilty pleas.

Yee was ensnared by an FBI investigation that spanned several years and led to the convictions of Raymond “Shrimp Boy” Chow, a reputed Chinatown mobster, Keith Jackson, a former school board president and fundraiser for Lee, and others.

The mobster, Kwok Cheung Chow, AKA Raymond Chow, AKA Ha Jai, AKA Shrimp Boy was sentenced on August 4 to life in prison following his convictions for racketeering, murder, money laundering, and conspiracy charges. Chow, 55, of San Francisco, served as the Dragonhead, or leader, of the San Francisco-based Chee Kung Tong organization.

On January 8, 2016, a federal jury found Chow guilty of criminal activities in connection with the racketeering organization and additional conspiracies. In all, Chow was charged with 162 counts including 125 counts of money laundering, aiding and abetting the laundering of proceeds of narcotics sales, conspiring to deal in illegal sales of goods.

Chow originally was charged with various racketeering related crimes in a criminal complaint filed March 24, 2015. The complaint charged that the purposes of the organization included the illegal trafficking of controlled substances, extortion, and participation in the collection of illegal debts. On October 15, 2015, the charges were formally amended in a Third Superseding Indictment to include murder. Chow was charged with and convicted of arranging the murder of Allen Leung and conspiring with others to murder Jim Tat Kong.

The jury found Chow guilty of every one of the 162 charges leveled against him.

In sentencing Chow, Judge Breyer said, “The murder in this case [of Mr. Leung] that requires the life sentence was particularly callous because it was the removal of an obstacle to your ascension to power. So whether you paid for it, or not, the question is: what is your motivation for doing so? And your motivation for doing so was to take over the leadership role of the tong and corrupt their purposes.”

“Chow was sentenced to serve the rest of his life in prison,” said U.S. Attorney Brian J. Stretch. “We hope that this prosecution and the resulting sentence provides the victims and their families with some measure of satisfaction that Mr. Chow will never again be free to continue with his life of crime.”

“This sentence reflects our commitment to vigorously pursue justice for the victims and community that Mr. Chow preyed off of for so long,” said FBI Special Agent in Charge John F. Bennett. “We hope that the sentence brings some form of closure for the families of Allen Leung and Jim Tat Kong, and shows that type of greed and violence will not be tolerated.”

“This was a case about power and greed,” said Michael T. Batdorf, Special Agent in Charge, IRS Criminal Investigation. “From narcotics trafficking to public corruption and murder, Mr. Chow laundered millions of dollars in drug and other illegal proceeds for a profit. Today’s sentencing closes the chapter on Mr. Chow’s life of crime.”

In addition to the life term of imprisonment, Judge Breyer also sentenced Chow to pay a special assessment of $16,200, to pay restitution in the amount of $15,881.60, and to forfeit $225,000.  The Judge also issued an order enjoining Chow and others from profiting from his life story.  Chow has been in custody since his arrest on March 26, 2014, and will begin serving his life sentence immediately.  

Another Health Care Organization Hacked!

Banner Health announced that it is mailing letters to approximately 3.7 million patients, health plan members and beneficiaries, food and beverage customers and physicians and healthcare providers related to a cyber attack. Banner Health says it immediately launched an investigation, hired a leading forensics firm, took steps to block the cyber attackers and contacted law enforcement.  

On July 7, 2016, Banner Health discovered that cyber attackers may have gained unauthorized access to computer systems that process payment card data at food and beverage outlets at some Banner Health locations. The attackers targeted payment card data, including cardholder name, card number, expiration date and internal verification code, as the data was being routed through affected payment processing systems. Payment cards used at food and beverage outlets at certain Banner Health locations during the two-week period between June 23, 2016 and July 7, 2016 may have been affected.  The investigation revealed that the attack did not affect payment card payments used to pay for medical services.

On July 13, 2016, Banner Health learned that the cyber attackers may have gained unauthorized access to patient information, health plan member and beneficiary information, as well as information about physician and healthcare providers. The patient and health plan information may have included names, birthdates, addresses, physicians’ names, dates of service, claims information, and possibly health insurance information and social security numbers, if provided to Banner Health. The physician and provider information may have included names, addresses, dates of birth, social security numbers and other identifiers they may use. The investigation also revealed that the attack was initiated on June 17, 2016.

An article by NBC News claims that roughly one out of every three Americans had their health care records compromised and most are completely unaware. Such hacks give criminals a wealth of personal information that, unlike a credit card number, can last forever. Many of those records show up for sale on the “dark web” where hackers openly advertise themselves and what they’ve stolen. One site offers fresh healthcare profiles stolen last year in California boasting “you can use those profiles for normal fraud stuff or to get a brand new healthcare plan for yourself.”

Despite high-profile hacks that have targeted high-profile retailers like Target and entertainment giant Sony Pictures, security experts are warning of a more prized target for identity thieves: medical records. Workers’ Compensation claim offices are also a repository of medical records, as well as the professionals that support them such as law firms. One might suspect that sooner or later, hackers will reach deeper into the smaller caches of prized healthcare data.

Banner Health is offering a free one-year membership in monitoring services to patients, health plan members, health plan beneficiaries, physicians and healthcare providers, and food and beverage customers who were affected by this incident.

It says it “deeply regrets” any inconvenience this may have caused.  Customers with questions can call 1-855-223-4412, from 7 a.m. to 7 p.m. Pacific Time, seven days a week.

Headquartered in Arizona, Banner Health is one of the largest nonprofit health care systems in the country. The system owns and operates 29 acute-care hospitals, Banner Health Network, Banner – University Medicine, Banner Medical Group, long-term care centers, outpatient surgery centers and an array of other services, including family clinics, home care and hospice services, pharmacies and a nursing registry. Banner Health is in seven states: Alaska, Arizona, California, Colorado, Nebraska, Nevada and Wyoming.