The Court Reporting "Shell Game"
How Insurance Companies Get Duped Into Increased Costs.
By Rick Paone
Certified Court Reporter
President, CCRA-NJ 2006-2008
The following story is typical of a growing trend in NJ and nationwide that illustrates the need for the insurance industry to know more – a lot more – about the practice of court reporting and any “deals” they may have entered into directly with a reporting service.
An attorney informed me that he’d been instructed by one of his carriers that he must utilize another reporting service exclusively, as the carrier had made a deal directly with that agency that was supposedly going to save them money. Despite the fact that court reporters are prohibited from entering into a financial arrangement with a party to a lawsuit as they can then be deemed “employees” of the party and the transcript can be objected to (N.J.A.C. 13:43-5.4) his carrier moved forward with their new arrangement. Court reporters are also prohibited from entering into a financial arrangement that may create the appearance of partiality to one side or the other.
Some time later, the attorney called me and said, “Can you take a look at some of these transcripts and bills – there’s something odd about them.” When I examined them, I knew instantly that the statutory margins (N.J.S.C. 13:43-5.9) had been manipulated to increase the page count (a prohibited practice in NJ, but something most attorneys and insurance companies are unaware of.) To prove it, I reproduced the entire transcript according to the statutory requirements for page format. The 55-page transcript they’d been supplied with was actually only 38 pages long. Was the per page price cheaper than what I’d been previously charging? Yes, by a few cents. However, the increased page count more than negated that savings – and the other items charged for – which were never mentioned in the “per page” quote given to the carrier – turned what should’ve been a $260 bill into one that was over $500. The attorney turned this over to the insurance carrier, who terminated their deal with this reporting service. This same scenario plays out across the country time and again where carriers are continually duped and legitimate reporting firms lose work by what amounts to nothing more than a financial sleight-of-hand at best, and outright fraud at worst.
In addition to the fact that reporters are prohibited from entering into contracts with insurance carriers, and in addition to the above example that can increase your litigation costs through page manipulation, there is another practice that most of the legal community is unaware of, and it can be far more costly than a cost-per-page issue.
A number of reporting services utilize unlicensed reporters. Often, the reporter lists themselves on the transcript with an official-sounding title such as “Professional Shorthand Reporter” or some such moniker. They are either student reporters, or reporters who have taken the State Certification Test and failed. The only standard for licensure in NJ is “Certified Court Reporter.” On more occasions than I can count, I have picked up a transcript at a deposition that was reported by a non-Certified reporter, and when it’s pointed out to all counsel present, their response is usually one of shock. Attorneys assume when a reporter walks through the door, they are Certified.
How does the use of an unlicensed reporter affect the insurance carrier and/or their counsel? It gives the adversary the opportunity to object to the use of the deposition. The plaintiffs’ bar, rightly so, has begun to pay attention to whom defense counsel has brought in as the reporter, as to whether they’ve entered into a contractual relationship with the defendant and/or whether the reporter is even licensed. They have the right to object to the deposition’s use at the time of trial if reported by an unlicensed reporter and requirements of N.J.S.C, 13:43-2.1 have not been met. The true danger for defense counsel (in addition to possible inaccuracies from the unlicensed reporter) is the rules require that the transcript must be read and signed by the witness if reported by a non-licensee, thus giving the witness a second crack at changing testimony. If a deposition is reported by a Certified reporter, reading and signing are automatically waived and the transcript is deemed the official record.
Adversarial counsel also has the right to inquire if the reporting firm has contracted with the defense carrier for preferred rates and services in violation of the Prohibited Practices statutes (calling into question whether the reporter has now become an “employee” of the defendant and creating partiality or the appearance thereof), and subsequently object to its use on the grounds that the reporter made a false statement when they signed the Certification Page attesting to the fact that they are not an employee of any party; counsel can argue that the transcript has been tainted by the fact that the defendant-litigant directly hired the reporter rather than leaving the selection process up to their representative counsel.
Of equal importance is the issue of utilizing unlicensed reporters vis-à-vis the competence and skill level. No insurance carrier would entrust their litigation to a law student who could not pass the Bar Exam, or seek expert medical reports from someone who did well in med school but couldn’t get their degree. Why would you trust the accuracy of a transcript that could make or break a case to a non-Certified reporter?
A third issue that can cost a carrier money is the prohibited practice of gift-giving incentives by the agency in return for an exclusive contract for work. Many states have rules pertaining to this issue; in NJ, a reporting agency can only provide items of “nominal value” such as pens, calendars and other promotional items. However, some firms dangle expensive tickets, Caribbean trips, and high-priced electronics to personnel in claims in return for work. While this may seem a nice perk to the individual, it does not serve the company’s interests if the same agency is bloating transcripts to increase billing, adding on charges for unwanted services, or utilizing unlicensed reporters.
One of the loopholes in much of the above comes from reporting firms who are run by non-licensed reporters. Years ago, most agencies were owned and operated by licensed reporters who were held to the rules and regulations mentioned above. In the past decade, investor-owned firms have come along and, since they are not operated by licensees, are not held to the same page format standards, gift-giving prohibitions, and rules governing the use of non-licensed reporters. Many states have sought legislation requiring these non-licensed firms to be held to the same regulations that licensees are governed by. There is, however, strong opposition from these firms to the bill. Ask yourself why? Why would they object to being held to the statutory page margins to ensure litigants are charged fairly? Why would they object to adhering to rules regarding gift-giving and usage of non-licensees unless they are using these loopholes to gain an unfair advantage over those who adhere to them?
Given the state of the economy today, everyone is looking to cut expenses. There is no reason an insurance carrier cannot do the same. There is certainly no prohibition that says a carrier cannot set reasonable rates, and inform their panel counsel, “Utilize any reporting service you wish, but this is what we pay.” Reporting firms can then choose to accept the work or not, and the carrier has not entered into any direct deals with the reporting service. This allows counsel to make the selection process of the reporting service they are familiar with, as most attorneys go through reporting services until they’ve found the ones they can rely on for superior service. When the carrier picks the reporter, it hampers counsel’s ability to litigate the matter properly, for all the reasons enumerated above.
If you work in the insurance industry, and your company has entered into such deals, or is contemplating same, it would be wise to consider the advisability of a practice that is prohibited in many states, puts your transcripts at risk, undermines the attorney’s ability to select the best reporting service, and ultimately may end up costing you more than you were paying in the first place.
(Rick Paone has been a Certified Court Reporter in New Jersey for 30 years. He has served on the Certified Court Reporters Association of NJ for many years, most recently as President.)