NORTH RICHLAND HILLS, Texas--UICI today announced that, without acknowledging any fault, liability or wrongdoing of any kind and subject to satisfaction of certain conditions, it has agreed to settle a substantial number of its pending "association group" lawsuits.
In particular, UICI, The MEGA Life and Health Insurance Company and Mid-West National Life Insurance Company of Tennessee (UICI's principal insurance subsidiaries), together with the National Association for the Self Employed, Inc., Alliance for Affordable Services and Americans for Financial Security, Inc. (the principal membership associations that make available to their members the Company's health insurance products), have executed and expect to
shortly file in U.S. District Court for the Northern District of Texas a definitive Stipulation of Settlement and Release agreement contemplating, among other things, the full and final settlement of a class action case originally filed in Mississippi and a representative action originally filed in California challenging the relationship between UICI's insurance companies and the membership associations.
Pursuant to the terms of the settlement, MEGA and Mid-West have agreed to include enhanced disclosures in their marketing and sales materials with respect to the contractual relationships between UICI and the insurance companies, on the one hand, and the associations, on the other hand, and MEGA and Mid-West have also agreed to enter into an injunction with respect to certain business practices.
In addition, members of a to-be-certified nationwide class of current and former MEGA and Mid-West insureds and current and former members of the associations will be entitled to relief in the form of free insurance coverage for a period of months under a personal accident policy to be issued by a UICI subsidiary (covering, among other things, accidental death and out-patient and hospital costs incurred as a result of specified accidents) and discounts on association membership fees.
The settlement also contemplates the payment of attorneys' fees to counsel for the plaintiff class. The proposed settlement does not contemplate a release of specific claims by individuals for insurance coverage benefits.
The Company believes that the terms of the settlement as contemplated by the Stipulation of Settlement and Release will not have a material adverse effect upon the financial condition or results of operations of the Company. As previously disclosed, in the year ended December 31, 2003, the Company recorded a $25.0 million charge associated with the reassessment of loss accruals established for the lawsuits that are governed by the settlement and for all other pending "association group" cases to which the Company and its insurance companies are currently a party.
The settlement of the to-be-certified class action litigation is subject to preliminary approval of the terms of the settlement and certification of a nationwide plaintiff class by the U.S. District Court for the Northern District of Texas; mailing notice of the settlement to members of the plaintiff class; and final approval of, and granting of a final judgment by, the Court. There can be no assurance that these conditions to effectiveness of the settlement will in fact be satisfied.
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