Plaintiffs use RICO to surmount difficulties in bad-faith cases.

For plaintiff lawyers lost in the desert of ERISA, another acronym may offer hope on the horizon: RICO.

It is too early to tell whether that hope is merely a mirage, but in the past five years, lawyers in a handful of bad-faith cases have turned to the Racketeer Influenced and Corrupt Organizations Act as a way around the often cumbersome constraints posed by the Employee Retirement Income Security Act.

In May, a federal judge in New Jersey heard arguments on whether to allow Richard Weiss to use RICO against First Unum Life, which is a subsidiary of UnumProvident Corp., the nation's largest disability-income insurer. (Weiss v. First Unum Life, No. 02-4249 (D.N.J. May 5, 2003).) To date, no federal court has al]owed RICO to be introduced in a bad-faith case, but several suits invoking the stature have been settled out of court. In one recent case, UnumProvident settled quickly, without filing an answer or a motion to dismiss. (Lipowski v. Pentair, Inc., No. 02-CV-05327 (E.D.N.Y. 2002).)

In relying on RICO, the attorneys in the New Jersey case are bolstered by the U.S. Supreme Court's decision in Humana v. Forsyth, in which the Court ruled that RICO could be used to sue an insurance carrier for state fraud claims. (525 U.S. 299 (1999).)

RICO offers many advantages to plaintiffs in insurance cases. It allows for a much wider array of discovery options than those available under ERISA, which bars punitive damages. And if plaintiffs prevail under RICO, they can win treble damages, attorney fees, and prejudgment interest.

Several attorneys have predicted that as insurance cases become harder to fight, more plaintiffs will turn to RICO. Attorney Arnold Levinson of San Francisco, whose practice focuses on bad-faith litigation, said he would be taking a seminar on RICO at an upcoming legal conference. "People are looking for ways to augment ERISA remedies, which are all but meaningless," he said.

UnumProvident lawyer Steven Del Mauro of Morristown, New Jersey, said that he did not want to discuss the case while the judge's decision was pending. In court papers, however, he wrote that the effort would amount to a "preposterous ... expansion of RICO liability."

"The expansion of civil RICO to the extremes proposed by Weiss's counsel falls so far outside of a paradigmatic civil RICO case that it borders on the absurd," he wrote.

Weiss's lawyer, Gail Cookson of West Orange, New Jersey, said she was inspired to look into the statute by the tenacity of her client, who firmly believes First Unum "tried to kill him" when they cut off his benefits.

In January 2001, Weiss was a 51-year-old investment banker earning about $250,000 a year when he suffered a heart attack that led to the lawsuit against First Unum. Concluding that he was no longer fit to work, Weiss's employers fired him that August. In October, First Unum informed Weiss that his benefits were being terminated.

The insurer's attorneys claim that Weiss's medical records showed he was no longer permanently disabled. Cookson countered that despite two angioplasties and the insertion of a pacemaker, Weiss nearly died from his heart attack, which left him with half a heart, low blood pressure, and chronic fatigue.

After two unsuccessful appeals to First Unum, Weiss sued the company for consumer fraud, bad-faith termination, and intentional infliction of emotional distress.

While the case was pending, Unum surprised Weiss by reinstating him and sending him a check for $94,000 in back benefits. In court papers, Del Mauro wrote that the reinstatement was a response to Weiss's attorneys, who argued that "this litigation is killing their client."

Cookson said the move was not enough for her to settle the case, noting that it did not protect Weiss's benefits from being cut off again in the future. In November, she amended the complaint to include the RICO counts.

UnumProvident, which grossed $9.4 billion in 2001, has been the subject of numerous complaints from company whistleblowers who claim they were pressured to rubber-stamp terminations of benefits. In several trials, current and former employees of the insurer have testified that the company uses bonuses and promotions to encourage the termination of benefits to high-income clients.

If she were allowed to go forward under RICO, Cookson said, she would

use her expanded discovery power to learn how Weiss fared at the company's "roundtable," the meeting where First Unum officials decided to end his benefits. "We believe these roundtables function as a kind of kangaroo court," she said. "We allege that Unum uses these meetings to reach fore gone conclusions."

Cookson based the RICO complaint on letters and telephone calls from the company to Weiss that she claims amount to mail and wire fraud. The company denies the charges, noting that Weiss has not identified fraudulent statements in letters or calls.

Based on previous suits and the testimony Of whistleblowers, Cookson said she can establish that the company's actions toward Weiss fit a pattern of a larger scheme to defraud. "It was a corporate ethos," she said. "It was really a conspiracy of unfairly denying claims."

As the effort to introduce RICO into bad-faith cases gathers steam, at least one attorney advises caution. RICO cases are difficult to prove, and courts set a high bar for acceptance, said Michael Hiller of New York City, who won settlements in at least two insurance cases using RICO.

"It's a very serious allegation," Hiller said. "RICO is not just another fraud statute. You can't just jump right in. If you don't know what you're doing, you're going to see the case dismissed."

Nonetheless, Hiller said that for an attorney who is prepared, the racketeering law can work. "Based on my experience, there are definitely insurance companies out there whose conduct falls under the RICO statute," he said.