Class-Action Victory Satisfies Woman
By: Peter Harriman
An Omaha insurance company will pay out about $20 million to victims of catastrophic illness and accidents because of a class action lawsuit filed by a Yankton woman.
But the woman, Kay Bergonzi, will get less than one-tenth of 1 percent of that. A $10,000 settlement won't propel her into a new tax bracket.
As she does every day, Bergonzi, 51, will spend the day on the phone for a credit card firm trying to collect on delinquent accounts.
She could have settled for hundreds of thousands of dollars but chose not to.
"I explained to her there were two different ways to go," said her lawyer, Mike Abourezk of Rapid City. "In an individual suit, quite frequently in cases like this there is a very strong chance the insurance company will pay you a lot of money to go away quietly.
"In a class action, there isn't any going away quietly. It's all got to be out in the public. It is longer, harder, more expensive and more difficult, and you won't get nearly as much money. The only upside is if you win, a lot of people get paid."
Bergonzi chose to file a class action lawsuit against a backdrop of being a single mother with an 18-year-old son still at home, and as a breast cancer victim who had lost a sister to cancer within a year of her own diagnosis and her father to the disease before that.
"I just thought it was the right thing to do," she said. "I thought about it long and hard, and it was just going to benefit so many people and cancer patients. Who could say no to that?
The lawsuit was settled in U.S. District Court in Sioux Falls on Tuesday, with Judge Karen Schreier presiding. Central States Health and Life Co. of Omaha (CSO) will immediately pay $7.5 million to 1,236 claimants nationwide. During the next 10 years it will pay approximately $9.6 million more than it would have to future claimants, based on a recalculation of its payment formula.
Richard Kizer, CSO president, said the class action lawsuit resolved discrepancies in the interpretation of a supplemental medical policy the company first sold about 15 years ago.
"With medical advances, it was just not an easy policy to interpret. We spent months working with lawyers on both sides to come up with language and a formula that provides an answer to policy holders," Kizer said. "Medical treatments are vastly different than at the time this policy was written. That, in large part, created disagreement."
The settlement Tuesday was the largest CSO has ever entered into, Kizer said. But it does not threaten the company's future, he said. CSO has done business in South Dakota about 70 years and still insures about 1,200 in the state with the supplemental medical policy.
Abourezk got involved with CSO in 1997, when his sister Carol, terminally ill with cancer, was seeking treatment in Houston. She was covered by a CSO policy her husband bought, but it paid only cents on the dollar, Abourezk said.
"I then located several other people with the same policy who had filed similar claims and found that the company was doing the same thing to each of them," he said.
Bergonzi knows how this could happen.
"When I was going through chemo(therapy), I was getting some of the insurance letters back that I was not qualified for this or that," she said. "I thought it was kind of weird, but I did not pursue it at the time. Chemotherapy just zaps your energy."
Her experience with the supplemental policy was probably typical.
In the late 1990s, "where I was working, the health insurance plan was kind of a low-end plan, and I was not happy with the deductibles," she says. "Here comes this little policy around. I thought, 'This should be great. It will cover my co-pays and give me a little extra cash if I have to miss any work.'
"I was really happy when our employer offered that policy to us. I had it six months before I needed to use it. I think it started in July and I was diagnosed in December 1998."
In pursuing his sister's case against CSO, and in light of all the other plaintiffs it brought to light, Abourezk thought about filing a class action lawsuit, but legal consultants he talked to in Seattle convinced him it would take years to litigate.
His sister died in 1999, and he put her case on hold to concentrate on the cases of four individual plaintiffs still living. He filed these as a single action, and in July 2001, U.S. District Judge Lawrence Piersol ruled CSO had underpaid on those claims. The company also paid punitive damages.
"I felt that we had won, because now CSO would have to start paying all the other people properly," Abourezk said. But the company did not redress underpayments to claimants who did not sue, and it did not change its payment formula, he said.
When appeals to the Nebraska director of insurance, a former CSO executive, fell on deaf ears, Abourezk decided a class action lawsuit made sense. He tried to rework his sister's case into such a suit, but CSO objected, and Abourezk said it appeared to him the company would prevail because aspects of the case were not sufficiently broad to represent a class.
At that point, he decided to look for other individual plaintiffs.
That's when he found Bergonzi. He thought she would make a good class action plaintiff. But he told Bergonzi that if she went that route, she would recoup only what CSO had underpaid, plus an administrative fee.
"I told her she would be giving up a minimum of hundreds of thousands of dollars, and that's not speculation," he said.
Plaintiff's victories on individual lawsuits had convinced CSO it would continue to lose on contested underpayment, and the threat of a class action lawsuit convinced the company that it would eventually lose big, Abourezk said, so it sought a settlement.
"At this point, the company is paying what they are supposed to pay," he said. "I am not accusing the company of wrongdoing at this point in time."
Kizer said CSO announced a new payment structure on the supplemental policy in "a mailing to all our policyholders who have this type of policy." He said about 1,200 claims have been filed, and there are between 15,000 and 18,000 outstanding policies of this type across the country.
CSO no longer sells that type of policy.
Bergonzi said that when she receives her settlement, "I will probably just bank it for now." She said she has caught up with outstanding expenses stemming from her illness, and her health now is "OK."
She took a day off work Tuesday to come to Sioux Falls for the class action settlement hearing.
Bergonzi hasn't met any of the CSO claimants who will be affected by her lawsuit, but "I would love to see the faces of the people who get the checks," she said.
"Mike tries to make out like I'm a big hero. I'm not," Bergonzi said. "I'm just an everyday person who goes to work and pays their bills. I'm just an average person. Sometimes he forgets that."
Always he forgets that.
"I am still just knocked out by her," he said.
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