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Massachusetts Casualty Insurance Company

A Judgment, which is ultimately expected to be worth over $6 Million dollars, was entered on Friday, March 17, 2006, in the case of David Jay v. Massachusetts Casualty Insurance Company (nka Centre Life Insurance Company)("MCIC"), a subsidiary of Zurich Insurance, in the Stark County Court of Common Pleas, Stark County, Ohio (Case No. 2004 cv 00843)

The March 17 Judgment confirms the earlier Verdict of the 8 member Jury, which ruled that Mr. Jay's disability insurer, Massachusetts Casualty Insurance Company, acting both directly and then through Disability Management Services, Inc. of Springfield, Massachusetts ("DMS"), MCIC's affiliated claim management company, breached five disability insurance policies issued to Mr. Jay in bad faith and with actual malice.

The Jury awarded Mr. Jay, an attorney, $550,000 in unpaid benefits and interest dating back to November 1998, $1,130,000 million for what the jury determined was MCIC's bad faith (i.e., denying benefits "with no reasonable justification therefore"), and $3,000,000 million in punitive damages for MCIC's actual malice. In a few weeks, the trial court is expected to further award Mr. Jay $700k - $1 million in attorney fees and costs and an additional $700,000+ in prejudgment interest. Those requests are presently being opposed by MCIC.

Importantly, Mr. Jay was also determined by the Court and the Jury to be entitled to benefits of $4,730 per month going forward under his five continuing disability policies.

Throughout the three week trial, the jury in Canton, Ohio, heard evidence of MCIC's breach, bad faith, and malicious denial of benefits by way of conduct undertaken by MCIC's affiliated benefits administrator, DMS of Springfield, Massachusetts.

The disability insurance industry generally suffered staggering financial losses through the 1990s in own-occupation disability insurance policies of the type issued to Mr. Jay. Insurance companies like MCIC focused the sale of these policies on lawyers, doctors, and other professionals. MCIC actually ceased the sale of such policies in 1998, at the very time that Mr. Jay filed his claim. Although MCIC had no employees beyond 1998, it has several thousand outstanding policies on which individuals continue to pay premium and file claims. The claims administration for Mr. Jay and the thousands of other MCIC policyholders is handled by DMS.

Mr. Jay offered evidence that to address poor profitability, MCIC and then DMS focused their efforts on claim payouts with the desire to "manage policyholder expectations" and "manage claim outcomes."

Mr. Jay's trial counsel, Michael A. Roberts, a partner with the Cincinnati, Ohio, firm of Graydon Head & Ritchey LLP (www.graydon.com), argued successfully that defendants' established business philosophy of "managing expectations " of policyholders was simply a euphemism for defendants' efforts to unlawfully deny claims and make up for bad business judgments made earlier. According to Attorney Roberts, who has successfully represented other MCIC / DMS policyholders, "It is obvious that MCIC's 1998 decision to stop selling policies like these was the result of financial losses, and that changes have been made to claim management."

"In our post-trial discussions with the jury, we learned that they would have liked to have received the additional business practices evidence which we were prepared to present," said Attorney Roberts. "It is gratifying that Mr. Jay has been vindicated and will someday finally receive the benefits which he was promised but maliciously denied, but MCIC has made it clear through their filing of certain post-trial briefs that it will not honor the Jury's Verdict. And it is my belief that there are likely other policyholders who have not been able to carry on the 8-year fight which Mr. Jay was been required to wage to this point. That is unfortunate. Insurers of disabled persons have the capacity to steamroll our society's most vulnerable people: the sick who are not working and who are not receiving the benefits for which they pay premium."

After the trial and despite the jury's decision - it was a struggle to persuade MCIC to waive Mr. Jay's premium (a benefit he is entitled to under the Policy if "totally disabled" as determined by the Court and jury) and commence the payment of his benefits going forward. With great reluctance and a "reservation of their rights" by MCIC, Mr. Jay was relieved of paying his premium for the next year and did receive a check for the month of benefits following the trial. Attorney Roberts added, "In light of the jury's verdicts, I was somewhat amazed-but I guess I should not have been-that we would need to continue to fight with MCIC for the premium waiver and benefit payment."

This Judgment adds to the $88 Million and $172 Million settlements entered by Zurich over the past several weeks on other challenged business practices.

Settlement Information Provided By: [Graydon Head & Ritchey]




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Published on Apr-19-06


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