We help people when insurance companies don't keep their promises.

State Official Advised Company

Lincoln Journal Star.com

A Nebraska-based insurance company settled a nearly $20 million class-action suit Tuesday and will reimburse about 1,200 policyholders in 29 states for underpayment of cancer treatment claims.

But a South Dakota attorney involved in the suit said Nebraska Insurance Director Tim Wagner gave advice to that company, Central States Health and Life Company of Omaha, where he was once a vice president.

And that advice helped delay reimbursement payments to cancer victims across the country.

Wagner said he provided only a personal opinion during a private phone conversation with the company president, something he often does for insurance executives who ask about specific situations.

But Common Cause spokesman Jack Gould said Wagner's conversation was inappropriate.

"Wagner should have realized he should not be giving advice to someone from his own company . . . where he had been a vice president," Gould said Tuesday.

Wagner told the company president the company likely did not have to refigure payments on claims that occurred prior to a court decision July 10, 2001, according to court documents and Mike Abourezk, a Rapid City, S.D., attorney involved in the case.

In July, a federal judge in South Dakota determined the company had underpaid claims for radiation and chemotherapy treatment on cancer insurance policies in a case brought by four South Dakota policyholders.

Abourezk, who won that suit, believed the company had a moral and legal duty to voluntarily reimburse other policyholders who were also underpaid but had not sued, he said.

The company disagreed, basing its refusal, in part, on advice given by several people familiar with insurance law, including Wagner, according to depositions relating to the case.

Wagner had been a company vice president before his appointment by Gov. Mike Johanns to head the Nebraska Insurance Department.

In a telephone deposition related to the class-action case, Wagner said he provided his personal opinion without research during a telephone conversation with company President Richard Kiser. It was not an official opinion of the department, he said.

Later, after receiving a complaint from Abourezk about the company's reimbursement policy, Wagner said he decided he could not participate in any decisions related to the issue because he had a potential conflict of interest.

He gave the issue to department attorney Manuel Montelongo for a decision.

"Clearly, all kinds of companies ask for advice on issues and I gave my advice to Mr. Kiser as I would to other insurance companies that make inquiry," Wagner said Tuesday.

Kiser could not be reached Tuesday afternoon to comment.

But Common Cause's Gould said Wagner should refrain from giving advice.

"This rings of a closed community that seems to be developing between the insurance commissioner and insurance companies themselves," he said.

"His job is to be a referee, watching out for the consumer as well as the companies. You don't make unofficial comments whether at the golf course or at the office, particularly when you have been vice president of the company," Gould said.

Earlier this year, Gould criticized Wagner for the department's annual golf outing for employees and insurance executives.

Because the company refused to reimburse policyholders voluntarily, Abourezk and two other attorneys brought a class-action suit against the company.

Tuesday's settlement provides about $7.5 million in retroactive payments to policyholders and about $9.6 million in future payments.

The three law firms received $2.5 million in fees.

Abourezk said a company that discovers it has underpaid policyholders has an "ethical and legal obligation to go back and correct the underpayments."

The state Insurance Department could have - and should have - interceded, he said.

"They have certainly got the mechanisms and the leverages to convince the insurance companies to behave properly," Abourezk said.

"Instead of siding with the terminally ill policyholders, Wagner sided with (the company)," Abourezk said.

Many of the people owed money have already died, he said. The settlement money will go to their estates.

But Wagner said the department cannot step in to resolve issues that belong in court.

"We are not a court for Mr. Abourezk to try his cases in. That's why we have a court," Wagner said. "That's why we have attorneys."

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