13 Fla. L. Weekly Supp. 1210a

Insurance — Personal injury protection — Discovery — Software used to reduce medical bills — Where insurer asserts defense that bills exceeded reasonable and customary charges, and it is undisputed that results provided by software owned by third party were sole basis upon which claims were denied or reduced, insurer must produce computer programs and data used to assess bills or independently prove defense without reference to computer program or results — Fact that insurer employed third party or used third party’s computer program to deny or reduce benefits does not affect medical provider’s right to discovery — Privilege — Trade secrets — Mere assertion of trade secret privilege does not foreclose discovery because court can limit disclosure to avoid irreparable harm — Further, privilege claim is inapplicable in light of insurer’s intention to rely on computer program at trial — Insurer that does not own program has no standing to assert trade secret privilege — Provider is not required to seek third party discovery from owner of program where insurer is already obligated to produce program upon which it relied to make challenged reductions and denials

AFFIRMED at 14 Fla. L. Weekly Supp. 835a

1ST HEALTH INC., AS ASSIGNEE OF ERNESTO IBARRA, Plaintiff, v. SENTRY CASUALTY COMPANY, Defendant. County Court, 12th Judicial Circuit in and for Sarasota County. Case No. 2005 SC 006140 NC. October 4, 2006. Kimberly C. Bonner and Judy Goldman, Judges. Counsel: Anthony D. Barak, Agnes, Barak & Zitani, Chartered, Sarasota, for Plaintiff. James E. Bogos, Allen, Kopet & Associates, PLLC, Tampa, for Defendant.

ORDER GRANTING PLAINTIFF’S MOTION TO COMPEL BETTER RESPONSES TO DISCOVERY

This cause came on for hearing, en banc, on September 7, 2006, on the Plaintiff’s Motion to Compel Better Responses to Discovery. The attached cases were consolidated for this hearing because each involves substantially the same issues. Having heard the arguments of counsel, reviewed the record and considered the authorities provided by both parties, the court enters the following findings:

FACTUAL BACKGROUND

These claims seek benefits under Personal Injury Protection (PIP) policies of insurance. In the above case, the Defendant, Sentry, issued such a policy to Ernesto Ibarra. The complaint alleges that Ibarra sustained injuries on January 28, 2005, inan automobile accident and that the Plaintiff provided medical services to Ibarra related to this accident on September 8, 2005. The complaint alleges an amount in controversy of $213.60 for medical bills that the Plaintiff claims the Defendant failed to timely pay in full. Count II also seeks a judgment for unpaid interest under the provisions of Florida Statute §627.736.

Sentry filed an answer and affirmative defenses on December 19, 2005. Affirmative defense numbers 9 and 10 allege that the charges at issue were not reasonable, necessary or related to the accident and that the charges exceeded the reasonable or customary charges for the services. Affirmative defense number 8 alleges that the Defendant made “appropriate” payments for all charges that were “properly” submitted by the Plaintiff.¹

The discovery at issue pertains to software owned by Mitchell Medical, which is a contractor paid by the Sentry to process medical bills. The record in this case demonstrates that the claims are forwarded to Mitchell Medical, which then processes the bills through its proprietary software using a database of fees that is compiled by a company called Ingenix. Mitchell Medical then provides Sentry with a recommended amount of payment.

The record also demonstrates that Sentry did not make any independent evaluation of the claims to determine whether the bills were reasonable, customary or exceeded the routine charges in the region for the same service. Therefore, it is undisputed that the results provided by Mitchell Medical were the sole basis upon which a claim would have been denied or reduced in these cases.²

The Plaintiff has propounded Interrogatories and Requests for Production, which, in sum, request that the Defendant produce or identify the methodology by which the reductions in these cases were made. The requested discovery includes, but is not limited to, all computer programs and data used to assess whether the bills in these cases were customary and reasonable.

In a prior order dated July 28, 2006, the court ordered the Defendant to proffer the information relating to the software and data that its witnesses would be able to testify to. In response, the Defendant provided the deposition of a Mitchell Medical representative from an unrelated case, as well a statistical summary and charge distribution from Ingenix, the company that supplies data to Mitchell Medical.

At the hearing on the outstanding discovery, the Defendant proposed that it provide, under protective order, certain information and/or documents that would be partially responsive to the Plaintiff’s requests. For example, Mitchell Medical will agree to provide its “Decision Point User Guide” which is apparently a training manual. However, Sentry states that Mitchell Medical and/or Ingenix claims a trade secret privilege and therefore will not produce the database used, the methodology employed or any documentation that explains how the information is actually evaluated.

In addition, Mitchell Medical will not provide, according to the Defendant, any information such as fee schedules or the identities of medical providers used to determine whether a certain charge is reasonable or customary. After reviewing each request and the adequacy of that which the Defendant states it can provide, the court further finds as follows:

PLAINTIFF’S MOTION TO COMPEL:

The Plaintiff seeks discoverable information. Once a party asserts a claim or defense, the opposing party has the right to discover all documents or witnesses relevant to such claim or defense. Fla. R. Civ. Pro. 1.280(b)(1). In these cases, this basic principle becomes even more significant because, literally, no other evidence currently exists that supports the Defendant’s allegation that the charges billed were not reasonable or customary.

The court rejects Sentry’s argument that it should not be obligated to provide the discovery because the items are not in their actual possession. The fact that the Defendant employed a third person or used a third person’s computer program in denying or reducing benefits does not affect the Plaintiff’s right to discovery. Sentry cannot maintain an affirmative defense based solely upon information held by a third party and then assert a privilege on behalf of that third party to circumvent its discovery obligations.

If the Defendant is unable or unwilling to obtain the relevant discovery from Mitchell Medical, then it must independently prove its affirmative defense without any reference to the Mitchell program or results. E.g. Baptiste v. Allstate Indemnity Co., 5Fla. L. Weekly Supp. 407b (Palm Beach County 1998) (the requested discovery as to the computer system would be relevant if the defendant intends to rely upon it in proving the reasonableness of the denial.)

This prohibition would include using an expert witness as a mere conduit for the undisclosed data. Counsel for the Defendant indicated at the hearing in this matter that Sentry may call an actuary as a trial witness, who would express opinions based upon the Mitchell/Ingenix data. However, such a procedure would be improper because a party cannot use an expert in this fashion to introduce otherwise inadmissible evidence. E.g. Riggins v. Mariner Boat Works Inc., 545 So. 2d 430 (Fla. 2d DCA 1989).

Although the Plaintiff made an ore tenus motion at the hearing to strike the affirmative defenses, such relief is premature at this time. The applicable statute allows the Defendant to defend the claim with “reasonable proof”, which it may be able to accomplish without relying upon the Mitchell data. Fla. Stat. §627.736(4)(b).

TRADE SECRET PRIVILEGE

The court has also considered the claim of trade secret privilege. The record in this case is relatively sparse as to the specifics of this claim; however, assuming that the information sought is in fact a trade secret, this does not automatically justify non-disclosure should the requesting party show a reasonable necessity for the material, and if the court limits disclosure to avoid irreparable harm. E.g. General Hotel & Restaurant Supply Corp. v. Skipper, 514 So. 2d 1158, 1159 (Fla. 2d DCA 1987); Rare Coin-It, Inc. v. I.J.E. Inc., 625 So. 2d 1277 (Fla. 3rd DCA 1993). Thus, the mere assertion of a trade secret does not foreclose disclosure.³ Furthermore, the privilege claim is inapplicable in light of Sentry’s intention to rely upon the Mitchell system in some manner at trial to refute the “reasonable and customary” claim. If Sentry intends to do so, the software is fully discoverable. See Northup v. Acken, 865 So. 2d 1267, 1270 (Fla. 2004)

Additionally, Florida Statute §90.506 requires that the person owning the trade secret, or his agent, actually assert the privilege. In this case, the Defendant does not own the system and is not an agent of Mitchell Medical or Ingenix. Therefore, the Defendant lacks standing to assert the privilege. In responding to the issue of standing, Sentry argues that it cannot produce what it does not possess, and further argues that direct disclosure should be sought from Mitchell Medical, who would then have standing to assert a trade secret privilege.

However, the Plaintiff theorizes that if the Defendant relied upon the Mitchell Medical system in processing the subject claims and in asserting its affirmative defenses, then it should be able to produce the system. Conversely, if the Defendant cannot produce the system, it should not be able to rely upon it at trial. With regard to any third party production directed at Mitchell Medical, the Plaintiff argues that it is not required under the discovery rules to seek third party discovery as to matters that the Defendant is already obligated to produce in support of its affirmative defenses.

The court agrees with the Plaintiff’s analysis and overrules the trade secret objection, as well as any work product or attorney client privilege. See also Progressive Express Ins. Co. v. St. Germain, 12 Fla. L. Weekly Supp. 1038a (Fla. 18th Judicial Circuit 2005). As discussed above, the Defendant has the benefit of using the system to reduce or deny benefits concurrent with its obligation to produce the system upon which it solely relies when its actions are challenged. Put simply, a party cannot simply contract away to a third party its obligations to provide discovery under the Florida Rules of Civil Procedure.

CONCLUSION

The Court therefore GRANTS the Plaintiff’s Motion to Compel Better Responses. Within 30 days from the date of this order, the Defendant shall completely respond to the Plaintiff’s First Set of Interrogatories, First Request to Produce, Supplemental Interrogatories and Supplemental Request to Produce. If the Defendant fails to completely respond, it shall be prohibited from relying upon or utilizing the Mitchell Medical/Ingenix software or the recommendations of Mitchell Medical and/or Ingenix in any way in its defense of this case. See Baptiste v. Allstate Indemnity Co., 5 Fla. L. Weekly Supp. 407b (Fla. Palm Beach County 1998); Friedman v. Progressive Consumers Ins. Co., 10 Fla. L. Weekly Supp. 1057a (Fla. Seminole County 2003).

The court reserves jurisdiction to address any other issues arising out of these actions, including attorney’s fees and costs.

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¹At the hearing, the issues were narrowed to whether the charges were “reasonable and customary”. The defendant concedes the charges were related to the accident.

²The Plaintiff also pointed out that on at least one occasion, two identical billing codes submitted to Mitchell resulted in different recommended allowances with no stated reason for the difference.

³Because no privilege log was filed, the court did not conduct anin-camera inspection. No paper was filed on behalf of Mitchell Medical or Ingenix.

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