Neb. High Court Nixes Reinstatement of Suit against State Farm

February 25, 2008

The Nebraska Supreme Court has refused to reinstate a lawsuit against State Farm in a dispute over whether the insurance company delivered the medical coverage it promised in its automobile policies.

The Supreme Court’s ruling on Friday, February 22nd upheld an earlier decision.

The policyholders had alleged that State Farm promised to let policyholders go to the doctors or hospitals of their choice when seeking care and have their medical bills paid by State Farm.

The level of coverage policyholders expected is called “traditional indemnity” medical coverage. But the lawsuit alleged State Farm provided “managed care” instead.

The Supreme Court ruled that the lead plaintiffs in the case, Mary and Thomas Lynch of Omaha, couldn’t make a claim against State Farm because Mary Lynch’s medical bills were covered by two other insurance companies: the other driver’s insurance and Mary Lynch’s health insurance.

The Lynches received $6,837 from AAA, which represented the other driver. Mary Lynch submitted $1,906 in medical bills to State Farm, which covered $1,436.

The Lynches were not left with any unpaid medical bills, but they said State Farm should have paid $470 in claims it denied in addition to the $1,436 it did pay.

“We conclude as a matter of law that because Mary recovered more than the amount of her medical expenses in her settlement with a third party, State Farm had no contractual obligation to Mary,” the court said in its ruling.

Because the court ruled the Lynches didn’t have a claim, the judges didn’t consider the policyholders’ other claims.

The Lynches’ attorney, Christopher Jerram, said the ruling will create an incentive for insurance companies to delay paying medical claims in the hope that their policyholders will collect money from someone else.

“It’s a sad day for consumers in Nebraska,” Jerram said.

The policyholders had accused State Farm of using a biased, unauthorized review process to arbitrarily deny some medical claims. They also accused State Farm Mutual Automobile Insurance Co. of violating Nebraska’s Consumer Protection Act and the Deceptive Trade Practices Act.

And the policyholders had argued the case should have been treated as a class-action lawsuit for as many as 2,000 people who had claims denied improperly since 1990.

For more information on the case go to Nebraska Supreme Court:

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