COMMITTEE ON CODES OF CONDUCT
ADVISORY OPINION NO. 26
Litigation Involving Health Insurance Companies.
Occasionally, cases arise in which an insurance company is a party
and the judge has a relationship to that company, generally in the form
of a policy of insurance involving the judge, the judge's spouse or children.
It could be health insurance, life insurance or other types of coverage.
Should a judge recuse in that situation?
Canon 3C(1)(c) of the Code of Conduct for United States Judges provides:
A judge shall disqualify himself or herself in a proceeding
in which the judge's impartiality might reasonably be questioned, including
but not limited to instances in which:
* * *
(c) the judge knows that . . . the judge or the judge's
spouse or minor child residing in the judges' household, has a financial
interest in the subject matter in controversy or in a party to the proceeding,
or any other interest that could be affected substantially by the outcome
of the proceeding.
Thus, in any litigation in which an insurance company is a party, if the
outcome of the litigation could substantially affect the value of the judge's
interest, i.e. the policy in the company involved, the judge should recuse.
The judge should also recuse if he or she has any other interest (other
than a financial interest) that could be affected substantially by the
outcome of the proceeding.
In 1973, the Committee determined that judges who hold Blue Cross
policies could sit in a case brought by an insurance company against a
local Blue Cross organization. At that time, the Administrative Office
of the United States Courts advised that all but two of the circuit judges
throughout the country, whether in active or senior status, participate
in various health benefit plans with Blue Cross-Blue Shield or some other
insurance company or association as the carrier. The Administrative Office
also related certain facts as to how the federal government negotiates
coverage by Blue Cross-Blue Shield and how the Administrative Office pays
a lump sum for the coverage provided the judiciary. The federal government
does not do business with local organizations. This type of practice is
followed with respect to all other insurers participating in the federal
employees health benefits program. It appeared that practically all circuit
judges could be affected in a slight degree by the result of the pending
case in which Blue Cross was a party.
The Committee determined that the interest that the judges had in
the Blue Cross case would not be considered a "financial interest" within
the meaning of that term as it is used in the Code of Conduct for United
States Judges. The interest is analogous to "the proprietary interest of
a policyholder in a mutual insurance company, or a depositor in a mutual
savings association, or a similar proprietary interest" which Canon 3C(3)(c)(iii)
states "is a 'financial interest' in the organization only if the outcome
of the proceeding could substantially affect the value of the interest."
The judges would have a financial interest in that company, and therefore
would be required in the Blue Cross case to recuse, only if the outcome
of that proceeding could substantially affect the value of their interest
in the company.
We also determined, in 1975, that two circuit judges who were insured
under a government-wide indemnity plan written by the Aetna Casualty and
Surety Company were not disqualified to sit in a case in which Aetna was
one of the litigants. The Committee determined that the Blue Cross-Blue
Shield opinion was analogous to the Aetna problem.
The Committee reiterates that when an insurance company is a party
before the judge, ordinarily, he or she need not recuse unless the judge
has a financial interest in the company. The judge has a financial interest
in the company only if the outcome of the proceeding could substantially
affect the value of the judge's interest in the company. This could occur
if, as a result of a judgment against the insurance company in the particular
case, the judge's premiums could be significantly increased or coverage
substantially reduced. Conceivably, a huge judgment against a medical insuror
could make it impossible for the insuror to continue to operate at all,
or at its prior level.
January 22, 1973
Revised July 10, 1998