Insurer Ordered to Pay $10,000,000.00 for Bad Faith Termination of Health Insurance Policy
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On September 14, 2009, the South Carolina Supreme Court upheld a jury verdict against Fortis Insurance Company, now known as Assurant Health or Time Insurance Company, for wrongfully terminating Jerome Mitchell, Jr.'s health insurance coverage after he was diagnosed HIV positive. The Court upheld the verdict, but reduced the punitive damage award from $15,000,000.00 to $10,000,000.00.
Mitchell, a 17 year-old student, sued Fortis for breach of contract and bad faith termination of his insurance coverage in 2003. Fortis cancelled Mitchell's coverage after receiving claims regarding treatment for Mitchell's HIV-positive diagnosis. Mr. Mitchell's coverage was terminated during a two-hour Fortis "Rescission Committee" meeting, at which the Committee also considered 45 other rescission cases. Fortis terminated coverage on the purported basis that Mr. Mitchell had misrepresented his HIV-positive status on his application for coverage. Evidence at trial, however, clearly demonstrated that the information on which Fortis was allegedly relying was inaccurate. Specifically, a single entry in Mr. Mitchell's medical records included an incorrect date. Mr. Mitchell, his health care providers, and his attorney attempted to bring the mistake to Fortis' attention, but the insurer refused to reinstate coverage for approximately 20 months. Evidence at trial strongly suggested that Fortis was aware it had no basis for the termination, and the South Carolina Supreme Court determined the evidence was sufficient to demonstrate that Fortis "tried to conceal the actions it took in rescinding Mitchell's policy."
South Carolina's highest Court also found "ample evidence in the record to establish that Fortis's conduct was reprehensible," and that Fortis "was deliberately indifferent to its contractual obligations and to Mitchell's health and wellbeing." Click here for a copy of the Supreme Court's written opinion.
Assurant's "post-claim underwriting" (reviewing medical recrods after claims are presented rather than during medical underwriting before coverage is issued) and rescission practices have come under recent fire. Amazingly, Fortis argued to the South Carolina Supreme Court that post-claim underwriting was perfectly legal, and thus apparently an acceptable practice! This summer, Assurant and other large health insurers were called to testify before Congress about rescission. Also testifying were individuals and family members of people who have had their health insurance rescinded, most of whom when they needed it most after being diagnosed with a terminal illness. I attended the hearing. The outrage on Capitol Hill was palpable.
Assurant CEO, Don Hamm, testified that his company's Enrollment Forms and applications are easy for the consumer to understand. When asked about the definition of certain medical terms used in the form, however, Mr. Hamm admitted he did not know the meaning of the terms, and in fact he could not say whether the copy of the form he was shown by Representative Bart Stupak of Michigan was current or not. Mr. Hamm's testimony drew laughs and gasps from the audience and several members of Congress could only shake their heads. Not surprisingly, Mr. Hamm decided not to testify at the next hearing held in Indiana. For a press release about Mr. Hamm's testimony issued by the House Committee, see Insurance Company Executive Cannot Explain His Own Application Form.
Fortis fought Mitchell's claims for more than 6 years. Now, finally, however, Fortis is being made to pay for its reprehensible conduct. Hopefully this award will send a message to Fortis/Assurant and other health insurers that engage in post-claim underwriting and bad faith termination that their conduct will not be tolerated and will be punished. Mr. Mitchell and his counsel are to be commended for standing up to Assurant and perservering for the past 6 years.
The attorneys at Spangenberg, Shibley & Liber, LLP are currently handling and investigating wrongful health insurance termination and wrongful claim denial cases againt Fortis/Time Insurance Company/Assurant Health. If you or someone you know has had health insurance coverage cancelled or claims denied, contact us for a consultation.