Lawyers, Guns and Money.

Class-action lawsuits multiplied in 1999 with the addition of filings against gun manufacturers and health maintenance organizations. Richard Scruggs, a lawyer who figured prominently in the lawsuits brought against tobacco companies, in November filed suit against five HMOs, charging them with anti-racketeering laws. The suit targeted Cigna Corp., Foundation Health Systems, Humana Inc., PacifiCare Health Systems and Prudential Healthcare, which is now owned by Aetna Inc.

The lawsuits seek class-action status on behalf the health plans' 32 million members. The complaints allege a "pattern of fraudulent and heavy-handed extortionate conduct" by exploiting physicians' fears of losing business to influence and interfere with proving health-care services.

In the fall, Humana Inc. was hit with a class-action lawsuit alleging that the health plan, which has 6.1 million members, failed to disclose financial incentives given to doctors. A suit that recently was filed on behalf of Aetna's 18 million HMO subscribers also attacked financial incentives and limits on physician referrals.

The health insurance industry was one target in a wave of high-profile lawsuits and verdicts with high punitive damages. Insurers and the corporations they insure dealt with the hard fact that in 1998 the top 10 verdicts awarded in the United States totaled $2.8 billion, an increase of 375% over the top 10 in 1997, according to Lawyers Weekly USA.

Lawsuits against tobacco companies have led to $246 billion in settlements, although there has been only one class-action lawsuit filed on behalf of ill smokers. That case, Engle vs. RJ Reynolds, could cost tobacco companies an estimated $500 billion. Tobacco companies haven't asked insurers to cover their settlements yet, but it could happen. "The tobacco industry will pull the trigger on insurance coverage if and when they have to," said Matthew Jacobs, an insurance recovery attorney at Kirkpatrick & Lockhart, Washington.

In a similar effort, 28 cities and counties brought class-action suits against gun manufacturers in 1999. The suits seek to recover governments' expenses related to police protection, emergency services and enforcement of local gun-control ordinances. Housing authorities around the country also are planning to file a class-action suit against the gun makers, holding them liable for unnecessary and preventable handgun violence.

Opinion about the potential impact of gun litigation on the insurance industry is divided. Many insurance industry observers believe the gun suits present a weaker product-liability case than other class actions, such as silicone breast implants or asbestos. But others say insurers are likely to take a large hit in light of the recent success against the tobacco industry.

"Gun litigation will have a significant impact on the insurance industry. Regardless of the merits of the lawsuits brought by the cities, the bottom line is that the gun manufacturers are facing an army of well-financed and well-thought-out plaintiffs attorneys who have the resources to take these cases to trial," said Robert Carter, an attorney with the Washington-based firm McKenna & Cuneo.

One insurer is already dealing with the aftermath. Two units of Chubb Corp., Warren, NJ., are being sued by Berreta U.S.A. Corp., one of the gun manufacturers named in the suits. Beretta is seeking coverage under the general-liability policies the gun maker has with Chubb.

James Pabarue, a partner and insurance litigator with Christie, Pabarue, Mortensen & Young in Philadelphia, thinks all industries should be concerned about class-action suits. "There is a substantial likelihood of an increase of these types of lawsuits," he said.