A jury in Napa, Calif., has awarded the Marin School Insurance Authority $4.66 million stemming from a lawsuit against its long-term third-party claims administrator, ESIS, Inc.
“This victory is especially rewarding considering how uncommon it is for public risk pools to sue their claims administrators,” said insurance and regulatory litigator Daniel Sovocool of Thelen Reid Brown Raysman & Steiner, LLP, who represented the plaintiffs. “With the complexity of this type of case, it can take considerable resolve to hold claims administrators accountable for poor claims practices. The school districts leading this case were not overmatched – they showed incredible grit and fortitude during this month long-trial, and ultimately prevailed.”
Sovocool predicts that the verdict will lead to more scrutiny of third-party claims administrators and could propel similar suits around the country.
The Marin Schools Insurance Authority consists of 21 agencies in Marin County, including 18 school districts, one community college, one county office of education and one pupil transportation agency.
ESIS, based in Philadelphia, is part of the ACE USA insurance company, the U.S.-based retail division of the ACE Group of Cos. ESIS was long owned by CIGNA until it was sold to ACE in 2000. ESIS served for decades as the workers’ compensation claims administrator for the Marin risk pool. An independent audit commissioned by the school districts in 2004, however, indicated that Marin’s claims, handled out of ESIS’ Fremon, Calif., claims office, were not properly administered.
According to Sovocool, some of the alleged mishandling included failing to give timely notification of when claims could pierce the self-insurance retention level, thereby triggering excess liability coverage; failing to properly investigate new claims; and failing to object to unreasonable and excessive medical treatments.
“The Fremont claims office of ESIS was in serious disarray,” said Sovocool. “ESIS actually rehired a former corporate officer, presumably to have him fix things. But, he ultimately testified against ESIS at trial.”
After nearly five weeks in trial, the jury took less than a half a day of deliberation to return unanimous verdicts on the breach of contract and promissory estoppel causes of action, ruling 11-1 in the plaintiff’s favor on the negligence cause of action.
One other named defendant, the Schools Excess Liability Fund, was dismissed late in the trial.
Source: Thelen Reid Brown Raysman & Steiner, LLP
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