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Political Insurance 

To help thousands of the disabled, a San Francisco attorney takes on an insurance company -- and New York Attorney General Eliot Spitzer

Wednesday, Jul 6 2005
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For ambitious politicians whose job it is to regulate financial firms, clashing with San Francisco trial lawyer Ray Bourhis is not a career advancement move.

In 1988, Bourhis recalls, he noticed that then-state Insurance Commissioner Roxani Gillespie "served many years without prosecuting a single insurance company for a single violation. We sued," Bourhis says. A San Francisco Superior Court judge ruled in Bourhis' favor, ordering the Insurance Department to enforce the law and appointing Bourhis a special master to oversee California's enforcement of the Unfair Claims Practices Act. That was 1991.

The same year, John Garamendi replaced Gillespie as commissioner, and she is now a private San Francisco attorney representing insurance companies.

In 1999, then-Insurance Commissioner Chuck Quackenbush sought a court order dismissing Bourhis from his special master role after the attorney released a report charging that the department had not issued any fines against insurers that'd failed to honor claims. A San Francisco Superior Court judge denied the order. The following year Quackenbush resigned amid an unrelated kickback scandal. He moved to Hawaii.

Now, Bourhis is taking on Eliot Spitzer, charging that the New York attorney general -- who has faced constant attack from those who feel he is too hard on business -- duped him into abetting a far too lenient settlement agreement with a national insurer that allegedly had a policy of defrauding people by unfairly denying their disability claims. Russell Mokhiber first reported Bourhis' dispute with Spitzer earlier this month in the newsletter Corporate Crime Reporter. Bourhis is not shy about repeating his criticism of Spitzer.

"I think he left his balls in the parking lot on this case, and I'm not sure why he did it," says Bourhis, referring to an agreement Spitzer announced in October 2004 with UnumProvident Corp., the nation's largest disability insurance company. Under the agreement, UnumProvident paid $15 million to settle accusations that the company inappropriately denied claims for benefits. The settlement also requires the insurer to re-evaluate 215,000 claims for the possibility that some of them may have been improperly denied. Other states (excepting Montana and California) also signed onto the deal.

"That's like nothing. It's like a tip. If I have a billion dollars from defrauding people, and I have to pay $15 million, it's like the cost of paying electricity. It's a totally meaningless act," Bourhis says.

UnumProvident spokeswoman Mary Clarke Guenther says Bourhis' complaints aren't to be taken seriously, because they align with his economic self-interest.

"We don't agree with Bourhis' assessment of that. It has been ratified by 48 states, and we have been working to implement that. We are continuing conversations with California. Because we're in the middle of discussions with the state, we wouldn't be able to comment on anything that's in development," Guenther says. "Mr. Bourhis is a plaintiff's attorney, and he has an economic interest in pursuing a campaign against our company. He's publishing a book in August, and we see his activity increasing as the publishing date nears."

That would be Insult to Injury: Insurance, Fraud and the Big Business of Bad Faith, to be published this September by Barrett-Koehler Publishers of San Francisco, in which Bourhis details his cases against UnumProvident.

California Insurance Commissioner John Garamendi is one of two state insurance regulators who have rejected the settlement crafted by Spitzer. "When we finish, [policyholders] will have a whole lot more" than what the Spitzer settlement provides, Garamendi told the Los Angeles Times in December. Garamendi's press office did not return a call requesting information about the California Department of Insurance's inquiry into UnumProvident's practices.

It seems like only yesterday when a farm boy-faced Eliot Spitzer would appear regularly on the news to make wonderful pronouncements: Master-of-the-universe stock analysts had returned to their roles as chump clerks. Insurers such as Marsh & McLellan really were the bamboozlers we always thought they were. Wall Street hoodlums were finally getting the comeuppance they'd long deserved.

I'd just as soon hold onto the agreeable fantasy that there are public figures out there willing to confront powerful, malfeasant financial interests -- and win. And it's important to remember that legal cases against corporations are never as simple as an outsider might believe, and that there are sometimes good reasons for a low-ballish settlement.

But it's also reasonable to wonder whether Eliot Spitzer, candidate for governor of New York, is in less of a political position to vigorously pursue an abuser such as UnumProvident than a mere Attorney General Eliot Spitzer might once have been.

A San Francisco attorney -- who's been right on these sorts of things before -- claims a swindling insurer was let go in a walk.

Say it ain't so, Eliot. Say it ain't so.


Ray Bourhis would seem an unlikely man to publicly criticize Eliot Spitzer. The New York attorney general has lately come under fire for the list of wealthy trial lawyer contributors for his campaign for governor. And Bourhis' focus during recent years -- suing Chattanooga, Tenn.-based UnumProvident -- has made him a very wealthy trial lawyer.

In 2002, a federal judge in San Francisco upheld a jury's $7.7 million award to a Berkeley chiropractor who went bankrupt when UnumProvident terminated her disability benefit for joint and muscle injuries that kept her from treating patients. The judge agreed with Bourhis' contention that the company purposefully avoided paying legitimate claims, ordering that the company "obey the law."

Since then, Bourhis has settled a couple of dozen cases against UnumProvident for "an average million, couple of million each," he says, declining to state precisely how much his crusade against UnumProvident has earned him. "Let's just say it's a lot of money."

Bourhis has been a source for segments on NBC's Dateline and CBS's 60 Minutes, in which UnumProvident insiders described a system where employees were systematically awarded bonuses for denying legitimate claims.

The next logical stop on this train seemed to be the office of corporate crime fighter Eliot Spitzer.

"Spitzer said he was worried that the insurance departments in the other states were going to do a whitewash [of UnumProvident abuses]. He put a guy in charge of this investigation, and I gave him everything -- deposition testimony, trial testimony, confidential internal documents from the president and CEO of UnumProvident. I gave him all kinds of stuff. We just opened up our files to them and let them have what they wanted," Bourhis says.

Five or six months went by, and Spitzer announced the multistate settlement he had negotiated with the insurer and 47 other state regulators. It provides no admission or findings of wrongdoing by UnumProvident. And while the settlement orders UnumProvident to reopen 215,000 claims, it allows the adjusters who unfairly denied the claims in the first place to review the files that are being reopened, Bourhis says.

"They got to investigate their own wrongdoing. They're just required to 'reconsider.' If the family asks for reconsideration, they'll just offer $50,000 to just settle everything. These people have no money coming in. They'd kill their grandmothers for $50,000. The company is in the driver's seat," Bourhis says. "We've seen hundreds of cases where the company has offered to settle claims for less than 10 percent of the present value of the policy benefits."

As it is, the settlement will allow insurers to continue to deny benefits unfairly, Bourhis says.

"Most people don't know anyone who files a large claim, and don't realize what they go through. So the insurance companies get away with murder," he says. "What we did with Spitzer was blow the whistle on them. He basically sold out."


Following Spitzer's brilliant run as a snarling business-watchdog attorney general, a recent poll has him leading current New York Gov. George Pataki, 50 percent to 37 percent, in a hypothetical gubernatorial matchup. He's earned this early bump in the polls by having taken on corporate malfeasance in many areas not ordinarily touched by state prosecutors, including biased investment banking research, bid-rigging in insurance contracts, improper trading by mutual funds, and payola in the music business, to name just a few.

I only hope his kid-glove handling of UnumProvident does not presage a new era in which Spitzer enters the governor's mansion, but leaves his gonads outside.

About The Author

Matt Smith

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