Anthem Blue Cross 2000 Annual Report Download - page 23

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Anthem Insurance Companies, Inc.
Notes to Consolidated Financial Statements (continued)
14. Contingencies
Litigation:
A number of managed care organizations have recently been sued in class action lawsuits asserting various causes of
action under federal and state law. These lawsuits typically allege that the defendant managed care organizations
employ policies and procedures for providing health care benefits that are inconsistent with the terms of the coverage
documents and other information provided to their members, and because of these misrepresentations and practices, a
class of members has been injured in that they received benefits of lesser value than the benefits represented to and paid
for by such members. Two such proceedings which allege various violations of the Employee Retirement Income
Security Act of 1974 (“ERISA”) have been filed in Connecticut against the Company or its Connecticut affiliate. One
proceeding, brought by the Connecticut Attorney General on behalf of a purported class of HMO and Point of Service
members in Connecticut, seeks to enjoin the policies and practices that are alleged to violate ERISA. No monetary
damages are sought. A second proceeding, brought on behalf of a purported class of HMO and Point of Service
members in Connecticut and elsewhere, seeks injunctive relief and monetary damages (both compensatory and
punitive).
In addition, the Company’ s Connecticut affiliate is a defendant in three class action lawsuits brought on behalf of
professional providers in Connecticut. The suits allege that the Connecticut affiliate has breached its contracts by,
among other things, failing to pay for services in accordance with the terms of the contracts. The suits also allege
violations of the Connecticut Unfair Trade Practices Act, breach of the implied duty of good faith and fair dealing,
negligent misrepresentation and unjust enrichment. Two of the suits seek injunctive relief and monetary damages (both
compensatory and punitive). The third suit, brought by the Connecticut State Medical Society, seeks injunctive relief
only.
The Company intends to vigorously defend these proceedings. All of the proceedings are in the early stages of
litigation, and their ultimate outcomes cannot presently be determined. Accordingly, no provision has been made in the
accompanying consolidated financial statements for liability, if any, that may result from these proceedings.
Following the purchase of BCBS-ME, appeals have been filed by two parties that intervened in the administrative
proceeding before Maine’ s Superintendent of Insurance (the “Superintendent”), challenging the Superintendent’ s
decision approving the conversion of BCBS-ME to a stock insurer, which was a required step before the
acquisition. In one appeal, Maine’ s Attorney General is requesting the Court to modify the Superintendent’ s
decision, by requiring BCBS-ME to submit an update to the statutorily mandated appraisal of its fair market value
and to deposit into the charitable foundation the difference between the net proceeds that have been transferred to
the foundation and the final value of BCBS-ME, if greater. In the other appeal, a consumers’ group is also
challenging that portion of the Superintendent’ s decision regarding the value of BCBS-ME. While the appeals are
still pending, Anthem does not believe that the appeals will have a material adverse effect on its consolidated
financial position or results of operations.
On March 11, 1998, Anthem and a subsidiary were named as defendants in a lawsuit, Robert Lee Dardinger, Executor
of the Estate of Esther Louise Dardinger v. Anthem Blue Cross and Blue Shield, et al., filed in the Licking County Court
of Common Pleas in Newark, Ohio. The plaintiff sought compensatory damages and unspecified punitive damages in
connection with claims alleging wrongful death, bad faith and negligence arising out of the Company’ s denial of certain
claims for medical treatment for Ms. Dardinger. On September 24, 1999, the jury returned a verdict for the plaintiff,
awarding $1,350 (actual dollars) for compensatory damages, $2.5 for bad faith in claims handling and appeals
processing, $49.0 for punitive damages and unspecified attorneys’ fees in an amount to be determined by the court. The
court later granted attorneys’ fees of $0.8. An appeal of the verdict was filed by the defendants on November 19, 1999,
and as part of the appeal, a bond in the amount of $60.0 was posted to secure the judgement and interest and attorneys’
fees. The ultimate outcome of this appeal can not be determined at this time. (See Note 17, fourth paragraph.)