Anthem Blue Cross is the latest insurer named in a lawsuit over illegally canceled policies.  The Los Angeles City Attorney is charging Anthem Blue Cross with deceptive practices and is seeking $1billion in restitution and penalties from the company.

Los Angeles City Attorney Rocky Delgadillo said Anthem, formerly Blue Cross of California, canceled policies and illegally denied claims when policy holders became ill.  In February, Delgadillo’s office filed a similar suit against Health Net Inc. for illegally canceling health insurance coverage for 1,600 customers. (more…)

Lawyers representing State Farm Insurance policyholders in Mississippi suing the insurer over Hurricane Katrina damage claims have been dismissed from the case.  Citing ethical concerns, U.S. District Judge L.T. Senter Jr. in Gulfport dismissed a group of attorneys affiliated with Richard “Dickie” Scruggs, the well-known lawyer who pleaded guilty last month to conspiring to bribe a judge.   Judge Senter has given plaintiffs involved in the State Farm lawsuits 45 days to retain new lawyers.

State Farm was one of the largest insurers on the Gulf Coast when Katrina made landfall there in 2005. Thousands of homes were reduced to rubble by wind and the massive storm surge created by the hurricane. Normal home owners policies do not cover damages from flooding, only wind. But in the case of Katrina claims, many home owners accused State Farm and other insurance companies of attributing damage to flooding, when in reality it was caused by wind, as a way to avoid paying the full value of claims. Some insurance companies initially made offers to settle claims for only pennies on the dollar, sparking thousands of lawsuits along the Gulf Coast. (more…)

Auction rate preferred shares are the  latest securities to be scrutinized by state regulators.  These investment vehicles were sold by closed-end mutual funds, and lately, many investors have complained they are unable to sell their holdings, which were billed as a short-term investments by the firms that sold them. Once considered safe, auction rate preferred shares are the latest victim in the fallout of the subprime mortgage collapse.

Auction rate preferred shares are long-term corporate bonds, municipal bonds and preferred stock on which the interest rates are reset periodically based on bids submitted through securities firms. Generally, rates are reset every  seven, 14, 28 or 35 days. In the past, auction rate preferred shares have been popular with institutional investors due to their low financing costs and the fact there are usually fewer parties involved in the financing process and no requirements for third-party bank support. (more…)

Health Net Inc. has been ordered to pay $9 million to a California woman for illegally canceling her health insurance coverage after it learned she had been diagnosed with breast cancer.   The Health Net fine, levied by an arbitration judge, came one day after the Los Angeles city attorney’s office announced it would be suing Health Net for illegally canceling health insurance coverage for 1,600 other customers

Patsy Bates, 52, a hairdresser from Lakewood, California, had been left with more than $129,000 in unpaid medical bills when Health Net Inc. canceled her policy in 2004. Bates had been insured with another company but was persuaded to switch over to a Health Net policy after an agent suggested she could save money. She said she had undergone surgery to remove a tumor and had received her first two chemotherapy treatments when doctors stopped treating her because her bills were going unpaid. Bates was able  complete her cancer treatment through a state-funded program. (more…)

The Supreme Court gave workers a major victory by allowing them to sue over mismanagement of their 401(k) retirement accounts.  Wednesday’s ruling could affect over 50 million employees with nearly $3 trillion invested in such retirement plans.  The court’s unanimous holding reverses a lower court decision barring individuals from filing 401K lawsuits over losses related to mistakes and misconduct and which had also protected employers from lawsuits.  That earlier decision was a blow to workers during a time when U.S. workers relying on the savings accounts to cushion their retirement was on the rise.

Justice John Paul Stevens recognized that retirement investing had been undergoing change since the high court’s last ruling on related issues over 20 years ago as individual plans—known as 401(k) accounts—burgeoned while employers moved away from defined-benefit plans.  As a result, Stevens wrote, courts should interpret employee benefits law as giving individuals the green light to sue over administrative problems with their accounts, rather than limiting cases to those that affected an employer’s “entire” retirement savings plan. (more…)

Critics of the health insurance industry say the gap between what a physician charges and what is reimbursed may be too big.  In response, New York State Attorney General Andrew Cuomo is suing UnitedHealthGroup—the nation’s largest health insurer—and Ingenix, its subsidiary.  Cuomo also launched an industry-wide investigation into health care reimbursements saying that some companies have been underpaying customers for a decade and that UnitedHealthGroup, in particular, manipulated data to cheat consumers.

The way insurers determine prevailing market rates for medical services has long been a subject of controversy; even the American Medical Association has a pending eight-year-old lawsuit.  The practice “is primarily unfair to consumers,” said Dr. Nancy H. Nielsen, president-elect of the medical association.  Cuomo said, “We believe there was an industry-wide scheme perpetuated by some of the nation’s largest health insurers to deceive and defraud consumers.”  Cuomo’s investigation comes when the industry is reporting huge profits while the rising cost of medical insurance has left about 47 million uninsured in the US.  “The larger issue is health plans make an awful lot of money,” said Sheryl R. Skolnick, a health care analyst for CRT Capital.  If insurers are found to have underpaid, they could end up having to make big restitutions to consumers.   (more…)

New York State Attorney General Andrew Cuomo said yesterday he is suing UnitedHealthGroup—the nation’s largest health insurer and its subsidiary Ingenix.  The New York attorney general also launched an industry-wide investigation into health care reimbursements.  Cuomo alleges that UnitedHealthGroup  manipulated data to cheat consumers, and he believes some insurance companies have been underpaying customers for a decade,  An investigation revealed two UnitedHealthGroup subsidiaries—United HealthCare Insurance Co. of New York Inc. and United Healthcare of New York Inc.—manipulated data to severely under-reimburse customers, to the tune of millions.  Cuomo has not yet filed charges, but said investigators found UnitedHealthGroup and its subsidiaries lied about data and manipulated numbers.

Cuomo said he would file a civil lawsuit to include three other subsidiaries of UnitedHealthGroup.  He  has subpoenaed 16 insurers, including Aetna, CIGNA, and Empire BlueCross BlueShield requesting they provide documents on how they computed reimbursements; copies of member complaints and appeals; and communications between members, Ingenix, and insurers. 

Cuomo’s office said they found Ingenix’s reimbursement database—owned by UnitedHealthGroup and used by most major insurers—used data resulting in smaller payouts. (more…)

Title insurance fraud became a growing problem during the housing boom, and now that the housing bubble has burst, the business practices of title insurance companies have come under increased scrutiny.  Earlier this month, a title insurance fraud lawsuit was filed New York State, alleging that title insurers engaged in price fixing and kickback schemes in an attempt to enrich themselves.  Title insurance fraud always results in consumers paying inflated prices, and the New York title insurance fraud lawsuit alleges that such practices have resulted in residents paying some of the highest title insurance premiums in the country.

Title insurance must be purchased for any type of real estate transaction, from home purchases to refinances.  Title insurance is insurance against loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens.  Because most consumers don’t understand what they are buying, they often depend on their real estate agents or mortgage brokers to recommend the title insurance company that best suits their needs.  What’s more, four companies - Fidelity National Title Group, a unit of Fidelity National Financial Inc.; First American Corp.; LandAmerica Financial Group Inc. and Stewart Title Insurance, a unit of Stewart Information Services Corp. – control 90% of the title insurance business in the United States. Title insurance rates in New York are set by an industry group, which submits them to state regulators for review. (more…)

Wachovia Bank—the nation’s fourth largest—was accused of allowing fraudulent telemarketers to use the bank’s accounts to steal millions of dollars from unsuspecting victims in a 2007 lawsuit.  Bank executives maintained that they were unaware of the thefts, but in newly-released documents from that lawsuit, Wachovia had both long known about allegations of fraud and had actually solicited business from companies it knew had been accused of telemarketing crimes.

Internal Wachovia email revealed high-ranking employees warned colleagues about telemarketing frauds routed through its accounts.  Documents also indicate Wachovia was alerted by other banks and federal agencies about ongoing deceptions, but that it continued to provide banking services to companies that helped steal as much as $400 million from unsuspecting victims.  Despite this, Wachovia continued processing fraudulent transactions, earning large fees every time a victim spotted a bogus transaction and demanded their money back.  One company alone paid Wachovia about $1.5 million over 11 months.  “We are making a ton of money from them,” wrote Linda Pera, a Wachovia executive, about a company later accused by federal prosecutors of helping steal up to $142 million. (more…)

A New Orleans home owner whose home was destroyed during Hurricane Katrina has won an appeal against the home owner’s insurance company that denied his claim.   By ruling against Lafayette Insurance Company, the Louisiana 4th Circuit Court of Appeals has given fresh hope to the thousands of Katrina victims who say their insurance companies acted in bad faith when they denied claims.

Lafayette had appealed an earlier  state court decision that said the insurance company had to pay for damage to an apartment building owned by an Orleans Parish man that was caused by flooding brought on by levy failure following Hurricane Katrina.  In addition to being a source of income, the building also served as the man’s home.  Lafayette paid the policyholder about $2,700 for wind damage, but he estimates his home sustained a total of $223,488 in damage that should be covered.  Lafayette maintained that because that damage was caused by flooding, it did not have to cover the loss.

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