Adjusters can sue for benefits terminations under RICO.
Insureds have the right to bring charges of illegal benefits refusals against carriers under the Racketeer Influenced and Corrupt Organizations Act (RICO) in the State of New Jersey, according to a ruling by the United States District Court for New Jersey.
In Weiss vs. First Unum Life Insurance Company, the court ruled on January 9 that New Jersey's Insurance Trade Practices Act (ITPA) does not preclude an individual's right to sue a carrier for refusal to pay under the statute.
The plaintiff, Richard Weiss, had a long-term disability policy with First Unum at the time when he suffered a permanently disabling heart attack, on January 2, 2001. In May 2001, Weiss filed a claim stating that he was totally disabled and sought long-term disability benefits. He first exhausted his short-term disability benefits and then collected long-term benefits from July 2001 until October 2001, at which point the carrier discontinued benefits.
Weiss alleged that First Unum's decision to discontinue his payment was based on the size of the payment, $11,000 per month, and not on consultations with physicians. He alleged that the carrier had not reviewed his medical records until after deciding to end his benefits and that tests that would have proven the permanent and total state of his disability were intentionally not ordered.
The District Court initially found that Weiss lacked standing to sue First Unum under the federal or state RICO statutes and thus dismissed his claim.
Weiss appealed the ruling and, on June 9, 2005, the District Court ruled that the McCarran-Ferguson Act precluded a federal civil RICO claim because such a claim would "impair" New Jersey's regulatory processes, as described in ITPA.
But in the current case, the District Court disagreed. In the 1999 Supreme Court case, Humana, Inc. vs. Forsythe, the court found that there were four measures to determine if a RICO claim would interfere with state regulatory efforts (and thus would not be allowed in court):
* Whether a private right of action is available under the state statute;
* Whether other state laws provided grounds for the suit;
* Whether punitive damages were available;
* Whether punitive damages available exceeded the amount recoverable under RICO.
The District Court found that although ITPA does not specifically allow for private actions, it does not prohibit them and therefore leaves open the door for claims under RICO. The court also found that RICO would not disturb the state's common law right of action against carriers.
The court also found that it was unclear whether the New Jersey Consumer Fraud Act could be applied to this case and whether punitive damages were available under other statutes in a benefits case such as the one now at hand.
Because Weiss's contention that a RICO claim was warranted passes each of these four tests, the District Court ruled that Weiss had standing to sue on this point and therefore remanded the case to a lower court for additional litigation.