United Healthcare 2013 Annual Report Download - page 98

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As of December 31, 2013, the Company had outstanding, undrawn letters of credit with financial institutions of
$39 million and surety bonds outstanding with insurance companies of $499 million, primarily to bond
contractual performance.
Legal Matters
Because of the nature of its businesses, the Company is frequently made party to a variety of legal actions and
regulatory inquiries, including class actions and suits brought by members, care providers, consumer advocacy
organizations, customers and regulators, relating to the Company’s businesses, including management and
administration of health benefit plans and other services. These matters include medical malpractice,
employment, intellectual property, antitrust, privacy and contract claims, and claims related to health care
benefits coverage and other business practices.
The Company records liabilities for its estimates of probable costs resulting from these matters where appropriate.
Estimates of costs resulting from legal and regulatory matters involving the Company are inherently difficult to
predict, particularly where the matters: involve indeterminate claims for monetary damages or may involve fines,
penalties or punitive damages; present novel legal theories or represent a shift in regulatory policy; involve a large
number of claimants or regulatory bodies; are in the early stages of the proceedings; or could result in a change in
business practices. Accordingly, the Company is often unable to estimate the losses or ranges of losses for those
matters where there is a reasonable possibility or it is probable that a loss may be incurred.
Litigation Matters
California Claims Processing Matter. On January 25, 2008, the California Department of Insurance (CDI)
issued an Order to Show Cause to PacifiCare Life and Health Insurance Company, a subsidiary of the Company,
alleging violations of certain insurance statutes and regulations related to an alleged failure to include certain
language in standard claims correspondence, timeliness and accuracy of claims processing, interest payments,
care provider contract implementation, care provider dispute resolution and other related matters. Although the
Company believes that CDI has never issued a penalty in excess of $8 million, CDI has advocated a penalty of
approximately $325 million in this matter. The matter was the subject of an administrative hearing before a
California administrative law judge beginning in December 2009, and in August 2013, the administrative law
judge issued a non-binding proposed decision recommending a penalty in an amount that is not material to the
Company’s results of operations, cash flows or financial condition. The matter is now before the California
Insurance Commissioner, who has indicated that he will not adopt the administrative law judge’s proposed
decision and will issue his own decision. The Commissioner’s decision is subject to challenge in court. The
Company cannot reasonably estimate the range of loss, if any, that may result from this matter given the
procedural status of the dispute, the legal issues presented (including the legal basis for the majority of the
alleged violations), the inherent difficulty in predicting regulatory fines and penalties, and the various remedies
and levels of judicial review available to the Company in the event a fine or penalty is assessed.
Endoscopy Center of Southern Nevada Litigation. In April 2013, a Las Vegas jury awarded $24 million in
compensatory damages and $500 million in punitive damages against a Company health plan and its parent
corporation on the theory that they were negligent in their credentialing and monitoring of an in-network
endoscopy center owned and operated by independent physicians who were subsequently linked by regulators to
an outbreak of hepatitis C. In September 2013, the trial court reduced the overall award to $366 million following
post-trial motions, and in December 2013, the Company filed a notice of appeal. Company plans are party to 41
additional individual lawsuits and two class actions relating to the outbreak. The Company cannot reasonably
estimate the range of loss, if any, that may result from these matters given the likelihood of reversal on appeal,
the availability of statutory and other limits on damages, the novel legal theories being advanced by the plaintiffs,
the various postures of the remaining cases, the availability in many cases of federal defenses under Medicare
law and the Employee Retirement Income Security Act, and the pendency of certain relevant legal questions
before the Nevada Supreme Court. The Company is vigorously defending these lawsuits.
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