American Specialty Health Subsidiaries File Lawsuit against Chubb Corp. for False Advertising, Failure to Cover Legal Expenses.

SAN DIEGO -- San Diego-based American Specialty Health (ASH) filed suit against Chubb Corporation for false advertising and for failure to cover ASH's legal expenses incurred in the successful defense against legal actions previously brought by the California Chiropractic Association (CCA). ASH subsidiaries purchased an insurance policy from Chubb that, according to its own online advertisements, included "broad coverage for managed care activities" and "defense expense coverage."

The lawsuits were filed on behalf of American Specialty Health's subsidiaries, American Specialty Health Plans of California, Inc. and American Specialty Health Networks, Inc.

ASH subsidiaries claim that, in addition to repudiating the advertising materials featured on its own Web site, Chubb failed to pay for ASH's defense in the litigation, failed to properly investigate ASH's claims, misrepresented the coverage purchased by ASH, and failed to act in good faith in the claim-handling process.

ASH subsidiaries purchased a Managed Care Organization Errors and Omission Liability Policy from Chubb Corporation. In its lawsuit, CCA charged ASH with unfair business practices, claiming that ASH refused to fairly compensate chiropractors for medical services, terminated chiropractors without cause, and reduced reimbursement rates to providers. As of December 2004, the Superior Court of San Diego dismissed 15 of the 18 charges.

Chubb's Web site (www.chubb.com) states that its policy provides "broad coverage for managed care activities," including "claims administration, establishment of provider networks...and services or activities performed in the administration or management of health care or workers' compensation plans." In April 2003, however, despite provisions in the policy and advertisements that showed a clear obligation to cover ASH's legal expenses, Chubb refused coverage.

In addition, the ASH subsidiaries' lawsuit charges that Chubb failed to disclose "all benefits" and "coverage" under the policy and failed to respond to letters from ASH in April 2004 and March 2005 protesting the denial of coverage, thus violating the California Fair Claims Settlement Practice Regulations. Those regulations require insurers like Chubb to respond to communications from policyholders within 15 calendar days.

"American Specialty Health is asking the court to compel Chubb Corporation to honor the commitment they made when they sold ASH their insurance policy," said George DeVries, chairman, president, and chief executive officer of ASH. "As a policyholder, we look forward to presenting evidence that Chubb failed to meet its obligations to ASH."

In this legal action, ASH seeks compensatory damages and interest, immediate payment of defense costs, a prohibition against false advertising, court costs, and punitive damages.

ASH Plans and ASH Networks are represented by the law firm of Stanzler, Funderburk & Castellon LLP.

American Specialty Health, Incorporated and its subsidiaries comprise the nation's largest organization for complementary health care benefit programs, health education programs, and health-related products measured in terms of annual revenues, members/insureds, employees, and contracted health plans. ASH administers benefit programs for 12.1 million members and discount programs for over 80 million members. ASH and its subsidiaries are located at 777 Front St., San Diego, Calif. 92101; phone [phone]. Visit ASH online at ASHCompanies.com.