Hege v. Aegon U.S. Llc
| Decision Date | 21 January 2011 |
| Docket Number | C/A No. 8:10–cv–01578–GRA. |
| Citation | 780 F.Supp.2d 416 |
| Parties | Stephen K. HEGE and Linda S. Hege, Plaintiffs,v.AEGON USA, LLC, f/k/a Aegon USA, Inc., and Transamerica Life Insurance Company, f/k/a Life Investors Insurance Company of America, Defendants. |
| Court | U.S. District Court — District of South Carolina |
OPINION TEXT STARTS HERE
Andrew J. Johnston, Andrew Johnston Law Office, Patrick Eugene Knie, Knie Law Firm, Spartanburg, SC, Gary Elmore Clary, Gary E. Clary Law Office, Central, SC, Susan F. Campbell, McGowan Hood and Felder, Columbia, SC, for Plaintiffs.Brent OE Clinkscale, Jacquelyn D. Austin, Michael S. Cashman, Womble Carlyle Sandridge and Rice, Greenville, SC, Kevin Kendrick Bell, Robinson McFadden and Moore, Columbia, SC, for Defendants.
This matter comes before the Court on Defendant Transamerica Life Insurance Company's (“Transamerica”) Motion for Summary Judgment. Having considered the parties' arguments, the exhibits in support of their respective positions, and the applicable law, the Court denies Transamerica's motion.
Transamerica and its predecessor corporation, Life Investors Insurance Company of America,1 (“Life Investors”) are the insurers on supplemental cancer insurance policies. These policies cover policyholders for the “actual charges” they incur for certain medical services. Historically, Transamerica had interpreted “actual charges” to mean the amount that the policyholder's healthcare provider initially billed to the policyholder, rather than the amount that the provider may have eventually accepted as payment in full.2 Claims were therefore paid according to how much the provider billed the policyholder. However, in 2006, Transamerica revised its claims process so that it would pay only the amount that the provider accepted as payment in full. This often resulted in policyholders receiving substantially smaller payouts than they would have received under the pre–2006 practice.
In 1994, Plaintiffs purchased an “actual charge” supplemental cancer insurance policy (the “Policy”) from Transamerica's predecessor and have since maintained that Policy. In 2003, Mr. Hege was diagnosed with cancer and began submitting claims under the Policy.
The Heges filed this action against Transamerica and its parent corporation Aegon USA Inc. on June 18, 2010, bringing claims for breach of contract, bad faith, fraud, and several types of declaratory relief. Plaintiffs assert that since April 1, 2006, Defendants have improperly interpreted “actual charges” to mean the amounts accepted by providers as final payment for services rendered and have used that interpretation to underpay claims. Specifically, Plaintiffs allege the Policy mandates that Defendants pay the “actual charges” for covered treatments, services, and procedures for “Covered Persons,” according to provider billings.
This suit is one of multiple actions filed against Defendants across the country regarding the interpretation of the term “actual charges” in their supplemental cancer insurance policies. The first action filed, Gooch v. Life Investors Insurance Co. of America, No. 1:07–cv–00016 (M.D.Tenn.2007) ( “ Gooch ”), sought injunctive relief on behalf of a national class. Subsequently, numerous statewide class actions were brought against Defendants, including Pipes v. Life Investors Insurance Co. of America, No. 1:07–cv–00035 (E.D.Ark.) (“ Pipes ”). The plaintiffs' counsel in Pipes, Phillip Bohrer, Scott E. Brady, and Stan P. Baudin (collectively, “ Runyan Class Counsel” or “Class Counsel”), filed a total of six of these “actual charges” actions against Defendants in various federal district courts; four were statewide class actions.3 See In re Aegon USA, Inc., Supplemental Cancer Ins. Litig., 571 F.Supp.2d 1369, 1370 (J.P.M.L.2008).
On November 21, 2008, Judge Susan Wright of the Eastern District of Arkansas denied class certification in Pipes. See Pipes v. Life Investors. Ins. Co. of Am., 254 F.R.D. 544, 550 (E.D.Ark.2008). Specifically, Judge Wright concluded that because the particular proposed class representatives' interests conflicted with those of policyholders, those proposed representatives could not adequately represent the class. Id.
Runyan Class Counsel and counsel for Defendants first discussed settlement in October 2008. After Judge Wright denied class certification and a November 2008 mediation failed, settlement discussions resumed. On March 3, 2009, Runyan Class Counsel, their clients, and Defendants agreed upon a national class action settlement. Among other things, the settlement provided that Runyan Class Counsel would receive $3,500,000 in attorneys' fees and that Defendants would not object when Runyan Class Counsel requested that amount at the settlement approval hearing.
On March 13, 2009, Runyan Class Counsel filed a new action in the Circuit Court of Pulaski County, Arkansas, to seek judicial approval of the settlement. Co., No. CV–09–2066–3 (Ark. Cir. Ct.) (“ Runyan ”). The named Runyan plaintiffs consisted of the same named plaintiffs from Pipes and the other five prior actions. After commencing the Runyan action, Class Counsel and Defendants jointly moved to stay all six federal actions pending the Runyan court's final approval of the settlement.
Defendants filed their answers in Runyan on April 3, 2009. Two weeks later, the parties memorialized their earlier agreement on all the settlement's terms in a written class action Settlement Agreement, which they filed on April 20, 2009. Three days later, the Runyan court granted preliminary approval to the settlement, defining the settlement class as follows:
All persons in the United States: (I) who were an insured, covered person, or beneficiary under a Cancer Policy in force at any time from January 1, 2004 through the date of this Order; or (ii) who were an insured, covered person, or beneficiary under a Non–Cancer Actual Charges Policy which is in force at the time of this Order, or who submitted a claim for Actual Charges Benefits under a Non–Cancer Actual Charges Policy after the effective date of the 2006 Updated Claims Procedures; or (iii) the surviving spouse or legal representative of such persons defined in (I) or (ii).
The Runyan court approved all named plaintiffs as representatives for the settlement class. It also approved the parties' proposed written notice, publication notice, and claim forms, as well as their proposed time lines for the mail notice, publication notice in USA Today, and the publication of a settlement Web site. The court noted that any class members who did not timely opt out could object to the proposed settlement in writing and at a fairness hearing to be conducted later that year.
On May 14, 2009, the Notice of Proposed Class Action Settlement (the “Notice”) was mailed to over 250,000 class members, including the Heges. The Notice indicated that policyholders who, like the Heges, had previously submitted claims, could receive a monetary benefit of 40% of the difference between the amount billed and the amount finally accepted, capped at a maximum of $15,000. Additionally, the Notice included a description of “non-monetary benefits” that policyholders would receive if they did not opt out. Among these benefits was a provision that in the future, “actual charges” would be construed as “the amount legally owed to the provider.” This would be a benefit, the Notice stated, because the parties “expect[ed]” it would likely lessen “the amount and frequency of future premium increases.” In the same paragraph, the Notice stated that such a construction was consistent with South Carolina law. Another non-monetary benefit was that Transamerica would waive any “claims or counterclaims for overpayment of benefits that [it] might otherwise have” against policyholders.
The Heges did not opt out of the settlement. Instead, Mr. Hege submitted a written objection to the settlement's terms. Specifically, Mr. Hege stated that he thought the $15,000 payment cap was unfair, but he was staying in the settlement class because he feared that Transamerica would sue him if he opted out.
In October 2009, Mr. Hege and other objecting class members from South Carolina (collectively, the “South Carolina Objectors”) moved the Runyan court to carve out a subclass for South Carolina class members. Alternatively, the South Carolina Objectors requested that the Runyan court provide South Carolina class members additional time to opt out of the settlement. The South Carolina Objectors argued that only after the time to opt out had expired did they learn that South Carolina law actually provided relief far exceeding what class members would receive by settling, making the settlement unfair to South Carolina class members.
After hearing a number of objections and motions to intervene, the Runyan court rejected all objections and denied all motions to intervene. Thereafter, on December 21, 2009, the Runyan court entered a Final Order and Judgment (the “ Runyan Order” or the “Order”) that gave final approval to the settlement and dismissed all class members' claims with prejudice. The Order contained a release wherein class members waived any claims they could assert against Transamerica regarding “actual charges” policies and payments made under those policies. The Runyan court also awarded Class Counsel the agreed-upon $3,500,000 in attorneys' fees.
Also on December 21, 2009, the district court in Gooch entered an order certifying a national class and entering partial summary judgment in favor of the plaintiffs. See Gooch v. Life Investors Ins. Co. of Am., 264 F.R.D. 340 (M.D.Tenn.2009). Significantly, the Gooch court granted summary judgment to the plaintiffs on their claims for breach of contract claim and declaratory/injunctive relief, both of which centered on the meaning of “actual charges.”
On October 4, 2010, Transamerica filed the instant Motion for Summary...
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