DeWayne Bailey; Champion Carpet Mills; et al. v. Empire Blue Cross/Blue Shield; Dennis Wilson Insurance Agency, Inc.; et al.
Published: May 20, 1995 | Result Date: May 1, 1995 | Filing Date: Jan. 1, 1900 |Case number: 93CV6179MP – $2,028,330
Judge
Court
SD New York
Attorneys
Plaintiff
Robert L. Brace
(Law Office of Robert L. Brace)
Timothy D. Cohelan
(Cohelan & Khoury)
Defendant
Experts
Plaintiff
Gerald Sullivan
(technical)
David R. Hickey
(technical)
Facts
In the underlying default RICO action: In 1989 William Loeb, now serving 71 months in Federal prison for embezzlement, obtained an Empire Blue Cross and Blue Shield of New York group health insurance contract for Consolidated Local 867, a purported New York labor union, he had formed. In fact, the union was a sham Mr. Loeb had set up to market the Blue Cross coverage nationwide. Because this New York "Empire" Blue Cross provided subsidized medical insurance to New Yorkers with preexisting illnesses; and the non-New Yorkers, who were otherwise uninsurable, were quick to join Loeb's phony union to obtain the needed coverage. Defendant Empire discovered the impropriety of the union and terminated the group contract in August of 1990 (retroactive to April, 1990). Approximately 4,000 of the original 8,000 policyholders were then "rolled over" to coverage with a series of fraudulent Defendant offshore insurers, including Winston Hill, Global Capital, Promed, Meadowlark, Old American, Provident Capital, and First Assurance. Despite the fact that very few health claims were paid by the alleged insurers, the agents who marketed the insurance continued to receive their commissions. In the instant jury trial: In December 1989 Plaintiff Champion Carpet Mills was told that its medical insurance premiums with Blue Cross of California were going to increase at this time, (Champion had 2 insureds who were dying from cancer.) Champion asked Defendant Dennis Wilson Insurance Agency Inc. ("Wilson") to locate alternative coverage for its employees which would still cover the 2 people with cancer. Wilson identified 3 possible alternatives including Kaiser and Loeb's Union Plan insured by Empire, Champion chose the Union Plan and did obtain valid coverage with Empire Blue Cross and Blue Shield for 2 months before Empire terminated the contract. In July 1990, Champion was moved by Wilson to coverage offered to members of the National Association of Professionals and Executives (NAPE). The NAPE Plan was purportedly insured by Lloyd's of London and then Winston Hill Insurance Company. These forms of coverage turned out to be non-existent. By December 1990 the Champion employees had incurred over one million dollars in unpaid medical bills. Champion quit paying premiums and Wilson stopped receiving commissions in July 1991. Medical Providers filed liens in the subject action to collect the unpaid medical bills. No probate estates were opened when the 2 cancer victims died. Defendant Wilson was first named as a party Defendant in the Bailey v. Empire class action's second amended complaint filed in January 1994. The Champion Plaintiffs did not learn of the class actions until late 1993/early 1994.)
Settlement Discussions
Earlier this year Empire and other Defendant agents agreed to pay $10,000,000 to settle the case. The matter proceeded to trial against one non-settling Defendant agent named Dennis Wilson Insurance Agency, Inc. Wilson offered $150,000 to settle the matter prior to trial.
Damages
$2,028,327 includes unpaid medical bills, interest, and attorney fees. Total damages in this class action case exceeded $50,00,000.
Result
The New York jury awarded $2,028,327 to the three California Plaintiffs who purchased the defective insurance from Defendant Wilson Insurance Agency, Inc.
Other Information
Plaintiffs pursued 6 California Common Law causes of actions against Defendant Wilson. In general, Plaintiffs claimed that Defendant committed Professional Malpractice, unpaid medical bills and sought emotional distress and punitive damages as well as legal costs. Defendant Wilson contended that the Champion Plaintiffs' claims for unpaid medical bills were both time-barred and preempted by ERISA. Defendant also contended that the surviving spouses of the cancer victims lacked standing to sue due to assignments given to the Medical Providers. (Note: Four days before the verdict was entered the California Court of Appeal (1st District) held in Hollingshead v. Matson 95 DAR 5309(1995), that identical State Law claims against Insurance Agents are preempted by ERISA.) The Federal Court (in Manhattan) refused to consider the California issue of ERISA pre-emption and instructed the jury that the Statute of Limitation for professional negligence does not begin to run until Plaintiffs are "Fully Aware" of the facts constituting Defendant's negligence. Judge Milton Pollack allowed Plaintiff's counsel to introduce numerous declarations on damage issues over Defendants hearsay objections. No class action claims were tried before the jury. The Court permitted an award of attorneys fees. The jury also awarded several hundred thousand dollars for medical bills incurred after the Champion Plaintiffs left the subject insurance plan. Judge Pollack refused to remand the case back to California for trial and claimed to have supplemental jurisdiction over the California state law claims pursuant to 28 USC 1367(a). This case was filed in February of 1992; three years and three months prior to this result.
Deliberation
1 day
Poll
unanimous
Length
5 days
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