Anthem Blue Cross 2002 Annual Report Download - page 84

NOTES
to Consolidated Financial Statements (Continued)
Anthem, Inc. 2002 Annual Report 79
behalf of individual doctors and several medical societies.
Other defendants include Humana, Aetna, Cigna,
Coventry, Health Net, PacifiCare, Prudential, United
and WellPoint. The managed care litigation around the
country has been consolidated to the U.S. District Court
in Miami, Florida, under MDL rules. The Court has split
the case into two groups, a “provider track” involving
claims by doctors, osteopaths, and other professional
providers, and a “subscriber track” involving claims by
subscribers or members of the various health plan defen-
dants. The complaint against Anthem and the other
defendants alleges that the defendants do not properly
pay claims, but instead “down-code” claims, improperly
“bundle” claims, use erroneous or improper cost criteria to
evaluate claims and delay paying proper claims. The suit
also alleges that the defendants operate a common
scheme and conspiracy in violation of the Racketeer
Influenced Corrupt Organizations Act (“RICO”). The
suit seeks declaratory and injunctive relief, unspecified
monetary damages, treble damages under RICO and
punitive damages. The court certified a class in the
provider track cases on September 26, 2002, but denied
class certification in the subscriber track cases.
Defendants in the provider track cases sought, and on
November 20, 2002 were granted, an interlocutory appeal
of the class certification in the Eleventh Circuit. Briefing
is beginning in the Eleventh Circuit. Due to Anthem’s
late addition to the case, it was not included in the
September 26, 2002 class certification order, and is there-
fore not part of the appeal; however, the Company may
be affected by the outcome of the appeal.
On October 10, 2001, the Connecticut State Dental
Association and five dental providers filed suit against the
Company’s Connecticut subsidiary. The suit alleged breach
of contract and violation of the Connecticut Unfair Trade
Practices Act. The suit was voluntarily withdrawn on
November 9, 2001. The claims were refiled on April 15,
2002, as two separate suits; one by the Connecticut State
Dental Association and the second by two dental
providers, purportedly on behalf of a class of dental
providers. Both suits seek injunctive relief, and unspecified
monetary damages (both compensatory and punitive).
The Company intends to vigorously defend all these
proceedings; however, their ultimate outcomes cannot
presently be determined.
On March 11, 1998, Anthem Insurance and its Ohio
subsidiary, Community Insurance Company (“CIC”) 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
CIC’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 dol-
lars) for compensatory damages, $2.5 for bad faith in
claims handling and appeals processing, $49.0 for puni-
tive 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. On May 22,
2001, the Ohio Court of Appeals (Fifth District) affirmed
the jury award of $1,350 (actual dollars) for breach of
contract against CIC, affirmed the award of $2.5 compen-
satory damages for bad faith in claims handling and
appeals processing against CIC, but dismissed the claims
and judgments against Anthem Insurance. The court also
reversed the award of $49.0 in punitive damages against
both Anthem Insurance and CIC, and remanded the
question of punitive damages against CIC to the trial
court for a new trial. Anthem Insurance and CIC, as well
as the plaintiff, appealed certain aspects of the decision of
the Ohio Court of Appeals. On October 10, 2001, the
Supreme Court of Ohio agreed to hear the plaintiff’s
appeal, including the question of punitive damages, and
denied the cross-appeals of Anthem Insurance and CIC.
In December 2001, CIC paid the award of $2.5 compen-
satory damages for bad faith and $1,350 (actual dollars)
for breach of contract, plus accrued interest. On April 24,
2002 the Supreme Court of Ohio held oral arguments.
On December 20, 2002, the Ohio Supreme Court ruled,
reinstating the judgment against both Anthem Insurance
and CIC, but remitted the punitive damages from $49.0
to $30.0, plus interest. The Court also ruled that the
plaintiff would receive $10.0 of the judgment, the plain-
tiff’s attorneys would receive their contingency fee on the
$30.0 plus interest, and that the remainder of the award
would be given to The Ohio State University Hospital for