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Insurer Paying $20 Million to Settle Lawsuit With Cancer Patient

Lincoln Journal Star.com

LINCOLN, Neb (AP) - A Nebraska company has agreed to pay $20 million to settle claims that it sold cancer insurance to people nationwide but paid only a fraction of the benefits when they got sick.

U.S. District Judge Karen E. Schreier approved the settlement Tuesday after a hearing in Sioux Falls, S.D., where one of the original complaints against Central States Health and Life Co. of Omaha was filed.

Of the $20 million, $7.5 million will be paid immediately to about 1,240 people who were denied coverage.

Of the rest, $2.5 million will pay attorneys' fees and the remainder will be put into a fund to pay for any future medical expenses incurred by the 1,400 people who filed claims or any of more than 18,000 other people nationwide who bought the policies but have not contracted cancer.

According to the class-action lawsuit, Central States sold cancer insurance policies that were guaranteed renewable for life.

But when people who bought policies actually got cancer, they discovered that Central States used such a narrow interpretation of the policy language that most of their medical bills were excluded, said Rapid City, S.D., attorney Michael Abourezk, who helped broker the settlement on behalf of the cancer patients.

The dispute arose from the company's interpretation of policy language that said it covered "treatment techniques" and chemical substances and "their administration."

Those two terms were not defined in the policies.

In one case, for example, the company would not pay for syringes or catheters used in administering chemotherapy. The company also refused to pay for any of the drugs or solutions used in chemotherapy to alleviate the lethal effects of toxic drugs routinely used in the treatment.

The company paid only for chemical substances that killed cancerous cells, despite the fact that those substances require the use of other chemicals designed to protect healthy cells.

The company also refused to pay for services associated with radiation treatment, such as dose calculations and the use of lead blocks to protect non-cancerous tissue from radiation.

"They have to calculate exactly how they are going to apply the radiation - you can't just shove them in front of a machine and flip the switch," Abourezk said. "But the company would only pay for shoving them in front of the machine and flipping the switch."

Richard Kizer, chairman of Central States, said Wednesday that the policies were sold as supplemental insurance and the company paid up to 90 percent of the treatment costs in some cases.

"It was different across the board," Kizer said. "We were paying benefits and, in most cases, we were paying a substantial percentage of the claims submitted. But we had a disagreement on how our policy should be interpreted."

Abourezk filed one of the original lawsuits against the company in 1998 on behalf of his sister, Carol, who had a cancer policy from Central States but later died of the disease.

"I'm glad that I was able to take something from the horrible circumstances of my sister's disease," he said.

Founded in 1932 as Central States Health & Accident Association, the company is now licensed in 49 states.

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