Colo. Jury Returns $37.3 Million Verdict Against Assurant Health Unit in Canceled Coverage Case

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February 1, 2010 Monday 03:51 PM EST

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Colo. Jury Returns $37.3 Million Verdict Against Assurant Health Unit in Canceled Coverage Case

Fran Lysiak

BOULDER, Colo.

A Colorado state court jury has returned a $37.3 million dollar verdict against a subsidiary of Assurant Health in a case of a policyholder whose coverage was canceled after she was seriously injured in an automobile accident.

Time Insurance Co. contended that the policyholder did not disclose previous medical treatments on her application for coverage -- specifically treatment for a uterine condition and an emergency room visit for shortness of breath. The company didn't cover about $185,000 in medical bills from the accident and canceled plaintiff Jennifer Latham's policy.

Assurant Health is the brand name for products underwritten by Time Insurance, formerly known as Fortis Insurance Co. That underwriting arm of Assurant Health returned to the Time Insurance name in September 2005 (BestWire, Sept. 18, 2009).

In e-mailed comments, Latham's attorney, Marc Levy, said that with interest, the total verdict amounts to about $50 million. It includes $20 million in punitive damages awarded to Latham, according to the jury verdict form. The verdict, handed down by the six-member jury in the Boulder County district court, also includes $2 million in economic damages awarded to Latham that the jury found were caused by Time's breach of its duty of good faith and fair dealing.

Peter Duckler, a spokesman for Assurant Health, said the company does not comment on litigation, including whether or not it will appeal the verdict.

According to Levy, Latham, and her children, Eden and Jackson, were insured under a short-term medical policy issued by Fortis Insurance starting May 2005, and then transferred to a long-term major medical plan, issued by Time Insurance. At trial, the company testified that this was a name change issue only, and it was always the same company, said Levy of the law firm Levy, Morse & Wheeler.

After Latham was injured in the car accident October 2005, the defendants began "a post-claim underwriting" investigation and took the case to their rescission committee, which meets once a week, Levy said. The "most problematic" of the company's claims-handling process was that the company never asked the insured, the agent, or the doctor for comment, but rather assumed the insured was not telling the truth, he said.

More information from Levy couldn't immediately be obtained.

Not long after Latham was released from the hospital, she received a letter from Time Insurance telling her that the company rescinded her policy and wouldn't pay her expenses from the accident, according to a local press report.

Last September, the South Carolina Supreme Court reduced a $15 million punitive damages award against Fortis Insurance to $10 million in a case in which it wrongly rescinded the health insurance policy of a 17-year-old student who tested positive for HIV.

In the Sept. 14 decision, the state high court wrote that any court reviewing a punitive damages award should consider the degree of reprehensibility of a defendant's conduct. Fortis' conduct was "highly reprehensible" and punitive damages were appropriate, Chief Justice Jean Hoefer Toal held in writing the opinion for the court (BestWire, Sept. 18, 2009).

In December 2007, America's Health Insurance Plans, the industry trade group, said it would support third-party review of decisions by health insurers to rescind policies as part of its universal health-reform proposal. The plan would guarantee access to coverage in the individual market and commit to limiting pre-existing condition exclusions (BestWire, Dec. 20, 2007).

"If you do have a health condition, you would certainly get coverage, either from the insurance company you apply to, or through a guaranteed access plan sponsored by your state," Don Hamm, president and chief executive officer of Assurant Health said of the proposal in a 2008 interview with BestWire. Third-party review of rescission decisions involves the insurer and customer clearly understanding their responsibilities, he said. That includes that insurers "are acting consistent with the contract that we have in place with our customers," (BestWire, March 7, 2008).

Time Insurance Co., a member of Assurant Inc. Group, currently has a Best Financial Strength Rating of A - (Excellent).

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])

February 2, 2010

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