United Healthcare 2014 Annual Report Download - page 96

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As of December 31, 2014, the Company had outstanding, undrawn letters of credit with financial institutions of
$33 million and surety bonds outstanding with insurance companies of $1.2 billion, 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 had never before issued a fine in excess of $8 million, CDI advocated a fine 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 nonbinding proposed decision recommending a fine of $11.5 million. The California Insurance
Commissioner rejected the administrative law judge’s recommendation and on June 9, 2014, issued his own
decision imposing a fine of approximately $174 million. On July 10, 2014, the Company filed a lawsuit in
California state court challenging the Commissioner’s decision. 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 wide range of
possible outcomes, the legal issues presented (including the legal basis for the majority of the alleged violations),
the inherent difficulty in predicting a regulatory fine in the event of a remand, and the various remedies and
levels of judicial review that remain available to the Company.
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. The trial court reduced the overall award to $366 million. In 2014, the Company
settled this and all other pending suits brought by individuals allegedly infected by hepatitis C for an amount that
is not material to the Company’s results of operations, financial position or cash flows. Although the Company
remains party to two class actions brought on behalf of uninfected patients of the endoscopy center seeking the
cost of medical monitoring, the Company does not believe these matters are material to its results of operations,
financial position, or cash flows.
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