Date: 03-29-2009

Case Style: AG Equipment Company, Suzanne Ash Kurtz v. AIG Life Insurance Company, Mark Heidenreiter

Case Number: 07-CV-556

Judge: Claire V. Eagan

Court: United States District Court for the Northern District of Oklahoma, Tulsa County

Plaintiff's Attorney: Dana L. Kurtz, Kurtz Law Offices, LLC, Lockport, Illinois and Brian J. Rayment, Kivell, Rayment, Francis, P.C., Tulsa, Oklahoma

Defendant's Attorney: Mike Carr and Steve Holden, Holden & Carr, Tulsa, Oklahoma

Description: Plaintiff, a Broken Arrow company, AG Equipment, Inc., alleged that AIG Life Insurance Company (through its claims handling unit, Medical Excess, Inc.) breached its contract and acted in bad faith by refusing to pay on a claim made by AG Equipment in the amount of $467,775.89 for cancer treatment for its in-house counsel. AG Equipment Company contracted with AIG Life to provide stop loss coverage to AG Equipment, which had a self-funded ERISA Plan for its employees. AG Equipment Company was not allowed to present at trial the prior attempts by AIG Life to get out of paying claims as it was obligated to pay under the contract. AG Equipment Company filed its claim against AIG Life for breach of contract when AIG Life refused to pay the claim after conducting an investigation in which its own investigator found that there was no evidence of fraud, as was alleged by the night-time janitor is a suspicious call to the TPA. After AG Equipment Company filed its complaint against AIG Life for breach of contract, AIG Life filed a counterclaim for breach of contract, fraud, and several other claims that were dismissed before trial. AG Equipment Company amended its complaint to include a claim for bad faith.

AIG Life took the position in the case that Plaintiff was required to prove its in-house counsel worked 30 hours per week, despite the fact that AG Equipment Company’s self-funded Plan document does not contain such language, despite the fact that AIG Life never required such proof from any other employer or for any other AG Equipment Company employee, and despite the fact that the contract between AG Equipment and AIG Life does not contain any such requirement. Defendant AIG Life focused its arguments at trial on this issue, which the Court allowed over Plaintiff’s objections. While Plaintiff maintained objections at trial to Defendant’s misreading of AG Equipment Company’s Plan document and the language of the contract between AG Equipment and AIG Life, which contained no such language, the Court allowed Defendant to proceed on these arguments. Defendant AIG Life has taken the position that will have long-ranging effects for all employers who have self-funded ERISA Plans and who contract with AIG Life for stop loss insurance. The position that AIG Life took in the case allows AIG Life to get out of paying any excess claim by setting the bar so high as to type of proof that AIG Life claims it requires from employers to prove initial and ongoing eligibility.

Judge Eagan granted summary judgment on the bad faith claims prior to trial and dismissed several of the counterclaims brought by AIG Life. The matter went to jury trial on February 19, 2009 on the issue of breach of contract and AIG Life’s counterclaims for breach of contract and fraud. The District Court substantially limited Plaintiff’s evidence at trial. The jury deliberated for three hours and returned a defense verdict and a verdict in favor of AIG Life on its counterclaims for both breach of contract and fraud. Plaintiff has filed post-trial motions based on the numerous errors in the record prior to trial and at trial. Plaintiff has also filed its notice of appeal.

Outcome: Defense verdict on all Plaintiff’s claims and a verdict in favor of AIG Life on its counterclaims for breach of contract and fraud.

Plaintiff's Experts: Plaintiff retained an expert, David Brammer, for its issues of bad faith and breach of contract. The witness was not called.

Defendant's Experts: As a counter, AIG Life retained expert Robert Comeau to testify in this matter. Over objection, the Court struck all expert testimony saying it wasn’t necessary in the case before the jury as there was no remaining claim for bad faith.

Comments: Reported by Michael L. Carr.