Tulare fights insurer over $1m hospital bill [The Fresno Bee]

Dec. 23--Tulare is on the hook for a whopping $1 million hospital bill if it loses a lawsuit against a health insurance company that denied a claim for a woman who died of cancer.

Sun Life Assurance Company of Canada denied the claim on the grounds that experimental drugs were used to treat the 19-year-old woman, the daughter of a city employee, when she got a bone marrow transplant.

But a Southern California law firm that specializes in battling insurance companies is arguing for the city that the drugs were a minor part of her medical care and unrelated to the transplant procedure, which the city says was a covered expense.

If the city loses, it would have to pay the $1 million out of $35 million it gets yearly to pay for police, fire and basic city services, city manager Don Dorman said. "We'll survive, but when a city loses money, you reduce other services," Dorman said.

The city sued the insurance company in November, three months after Stanford Hospital in Palo Alto -- where the bone marrow transplant took place -- sued Tulare for not fully paying the $1,041,711.98 bill.

Both cases were filed in Santa Clara County Superior Court, but no trial date has been set.

Sun Life has until the end of the year to respond to the city's lawsuit, which alleges breach of contract and bad faith.

In an email response, Sun Life spokesman Tim Stone said the company does not comment on pending litigation.

The city self-insures up to $80,000 per person and buys "backup" insurance to cover expenses over that.

"We pay a lot of money for insurance coverage on the reliance they will be there when we need them," Dorman said. "The company is just trying to get out of its obligation."

How much the city paid Sun Life annually was not immediately available.

Typically, the city pays medical bills, then files a claim. But the city paid Stanford only $439,500 and halted further payment when Sun Life refused to pay on the claim. The city has asked Stanford to return the money it paid.

The woman, who died and is not named in court filings, was diagnosed in late 2009 with acute myeloid leukemia.

She was also pregnant.

In 2010, she gave birth to a child, then got the bone marrow transplant. She died after several months of hospitalization.

At the time of the transplant, she was given medication to fight off "graft versus host" disease, a condition common to transplant patients in which the body rejects foreign tissue, the lawsuit said.

She agreed to participate in a clinical trial that involved testing two drug combinations to see which was most effective in fighting the disease.

The insurance company told the city it was denying the claim because the trial involved experimental drugs, which the policy does not cover, said Travis Corby, attorney for the Shernoff Bidart Echeverria Bentley law firm in Claremont.

"We've never seen an insurance company try to deny an entire hospitalization or treatment because of a small portion of the unrelated care," Corby said.

The drugs cost $23,000, a fraction of the total cost, he said. Furthermore, it's wrong for the company to allege the drugs are experimental, Corby said. "It's called a clinical trial, but really it's a different combination of the same drugs they always use," he said.

The reporter can be reached at (559) 441-6104, [email protected] or @fb_LewGriswold on Twitter.

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