I received a phone call last week from a young man with a difficult problem. I’m wondering if one of the IB readers can think of a solution.
He was working for a 50+ person company that had a self-funded plan through a large carrier. The company was having financial problems and had notified the employees that the plan would terminate as of July 31, 2007. Because of this, he enrolled on his wife’s medical plan effective August 1. On July 14, the employee was involved in a serious bicycle accident, spent five days in the hospital and incurred in medical expenses in excess of $100K.
In early August, a bank seized the assets of the company…they were obviously in default on some agreement…and sold them to a third party. This has left no money to pay the medical bills.Who’s going to pay the hospital and the doctors? There's nothing left of the company to pay anything. The health insurance carrier? They issued the Certificate off Credible Coverage showing a July 31 date termination date. It's not unreasonable to assume that a document showing a July 31 coverage end date actually means that the coverage is in effect through July 31. The company's General Liability policy? Assuming, that is, that it had employee benefit coverage. If not, would their P/C broker's E&O policy come into play? How about the Directors and Officers insurance policy? A strong argument could be made that a self-funded plan is unsuitable for a financially troubled company. The corporate officers must have known the company’s financial position...especially if the company was in (or close to) a default position on a loan. And lastly, what about the health insurance broker’s E&O policy? If the broker was aware of the company financial position and failed to recommend a change to a fully insured plan, does he (or she) share responsibility?
Beats me…I referred him to a good plaintiff attorney who works in this area. All I know for sure is that a client’s friend is lying sleepless at night, worried he’s going to lose his house.