Confidential
Settlement – $700,000Judge
Court
Orange Superior
Attorneys
Plaintiff
Defendant
Facts
In 1986, the wife-plaintiff, now deceased, a 69-year-old housewife at the time of her death, was diagnosed with AIDS. The wife-plaintiff obtained AIDS from a blood transfusion received after a routine knee surgery in 1984. By early 1993, the wife-plaintiff was in the advanced stages of the illness and was having difficulty digesting any solid foods. Her doctors prescribed a pre-digestive substance known as Vivonex to assist in digestion, which was administered intravenously. As her illness progressed, the Vivonex became her sole source of nourishment and sustenence. The wife-plaintiff was eligible for Medicare, which paid 80% of the approved cost of the Vivonex treatment. Medicare approved approximately $1,000 per month and paid $800. The wife-plaintiff had purchased an optional Medicare supplement policy from the defendant health plan which was designed to cover 20% of the cost for medical treatments which Medicare was not obligated. Medicare paid its share for the entire time the wife-plaintiff was provided the Vivonex treatment. In September 1994, the defendant health plan sent the plaintiffs a letter stating that it had made a mistake in that Vivonex was a nutritional supplement not covered under the policy and that coverage under the supplemental plan would be terminated as of November 1, 1994. The plaintiffs alleged that the health plan contract contained no such exclusionary language and nothing in writing provided to the plaintiffs contained the exclusion. The wife-plaintiff wrote a letter to the defendant health plan asking them to refrain from terminating her benefits, stating that the Vivonex was her sole source of sustenance. The defendant submitted the decision between its claim personnel and medical directorto a comittee. In December, 1994, the defendant upheld the decision to terminate the wife-plaintiffs' benefits on the ground that the Vivonex which the wife-plaintiff had been using for nearly two years was a supplement and other similar products were available to her. The plaintiffs filed suit in January, 1995, in state court based on bad faith and breach of contract theories of recovery. The defendant removed the action to federal court on the grounds that the claim was governed by the Medicare Act. The plaintiffs moved to remand the action on the ground that the Medicare Act did not apply because the subject health plan was a separate, optional contract of insurance, and that no claim was being made under Medicare because Medicare was fulfilling its obligation to the plaintiffs to pay for 80 percent of the Vivonex treatment, while the health plan, under the supplemental insurance, was not. The motion, before Hon. Gary Taylor, was granted. After the defendant made a second unsuccessful motion in state court to compel arbitration, and after the wife-plaintiff died, a settlement was reached.
Settlement Discussions
The plaintiffs demanded $1,000,000. The defendant originally offered $200,000.
Damages
$1,200 (payment of benefits)
Injuries
Emotional distress
Other Information
The case was settled approximately six months after it was filed.
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