Beyond the Courthouse
John Roemer
Daily Journal Staff Writer

Ray Bourhis is So Irked by the Tactics of the Insurance Industry That He Has Taken His Anger to the Media

No courthouse is big enough to hold San Francisco lawyer Ray Bourhis' crusade against the insurance industry.

Bourhis, 60, a veteran insurance practices attorney, pursues litigation against underwriters for his plaintiff clients. But he's also taken his battle outside the legal arena to wage a media blitz targeting the same opponents he assails in court.

Most notably, he's inked a book-length expose' and gone on NBC's "Dateline" to blast arch-foe UnumProvident Inc., the nation's largest disability insurance carrier, for allegedly unfair denials of coverage.

Unum Provident rejects Bourhis' claims. In a statement to the Daily Journal, the Tennessee company said:

"There is a small group of plaintiffs' attorneys who have financial motivations for criticizing our company over the past half-dozen years. We regret this and are making every effort to serve our policyholders in a manner appropriate for an industry leader."

Bourhis has won two seven-figure federal jury awards in California's Northern District federal court against UnumProvident. He remains outraged that despite those victories, UnumProvident refuses to pay even his clients' claims, let alone damages awards.

One client is bankrupt and may be on the verge of suicide as a result of Unumprovident's negligence, he said.

The company declined to provide responses to a reporter's detailed questions about its conduct. In general, it asserted that last year it paid out $3.7 billion in claims.

"Of the approximately 421,000 new disability claims filed with the company in 2002, approximately 90 percent were paid," UnumProvident said on a printed fact sheet.

Bourhis calls this misleading. "That's like Jesse James saying he didn't rob all the banks," he said in an interview at the Battery Street offices of his firm, Ray Bourhis. More to the point, he asserts, is a UnumProvident tactic of wrongfully terminating thousands of policies each year - a move he believes boosts the company's bottom line by as much $100 million annually.

UnumProvident's fact sheet does not address this issues. It does say that "Integrity in claims paying and helping people return to work is essential to the company's long-term success."

Bourhis' taste for passionate advocacy against insurance companies was inspired by his mother's bitter experience with her health plan. When she suffered a heart attack during Bourhis' teen years, an insurer denied coverage, he said.

"I knew nothing about insurance or law then," Bourhis said. "But she was repeatedly denied medical care, and I've never forgotten what she and my father went through. She was bedridden for years before she died."

Bourhis' effort to extend his attack against insurers into the court of public opinion has mixed results.

Negative publicity on "Dateline" and on a "60 Minutes" segment last Fall about UnumProvident's allegedly cheating customers out of benefits caused company stock to decline in value. UnumProvident's profits fell by 40 percent, to $272.7 million, through the first nine months of 2002.

Even so, Fortune magazine named UnumProvident one of its "most admired companies" for the third year this year.

Bourhis has lobbied state Insurance Commissioner John Garamendi to crack down on wayward underwriters.

And he's issues a plea for Congress to review the Employee Retirement Income Security Act (ERISA), a complex federal pension law that Bourhis claims is a little-understood bad deal for policyholders.

Then there's his new Web site, www.insuranceconsumers.com, designed to rate companies, explain terminology, answer questions and furnish claims aids.

Bourhis speaks with the authority of a special master, a role he has played since 1991, when San Francisco Superior Court Judge John Dearman appointed him to oversee state enforcement of the Insurance Code's Unfair Claims Practices Act.

Still, not all Bourhis' extrajudicial efforts are successful.

In 1990, he lost to Garamendi in an electoral bid to be insurance commissioner. His book on Unum Provident, "Infectious Greed" has yet to find a publisher. And Garamendi has nixed at least part of his reform agenda, refusing Bourhis' request that the issue a consumer warning about ERISA preemption.

That law bars damages awards or attorney fees for insurance bad faith practices, limiting a client's recovery to the amount he should have been paid under his policy's limits--an amount often too small to litigate.

Insurers have been eager to take unfair advantage of ERISA, Bourhis said. Sometimes they falsely inform claimants that their policies are subject to the law when they aren't . That happened to Bourhis' client Joan Hangarter, a Berkeley chiropractor who bought an individual disability insurance policy from UnumProvident subsidiary Paul Revere Life Insurance Co.

When Hangarter developed tendinitis and was unable to work, the policy paid her benefits for 18 months, then recharacterized her occupation as "business owner" and ruled she was not disabled because she could perform bookkeeping tasks.

Despite the self-employed Hangarter's purchase of the policy as an individual, evidence at the trial showed that UnumProvident's denial letter cited ERISA preemption - which applies only to insurance furnished through employers.

A unanimous federal jury in San Francisco last year awarded Hangarter $7.67 million, including $5 million punitive damages. Hangarter v. The Paul Revere Life Insurance Co. C99-5286Ji.

UnumProvident's president, J. Harold Chandler, responded to published criticism of his company's handling of the Hangarter case in December 2002 letter to the Chicago Tribune. "Joan Hangarter, a chiropractor in California, suffers from a condition commonly known as "tennis elbow" he wrote.

"After she was paid a considerable amount of benefits, five physicians, including her original treating physician, testified that there was no objective medical evidence to suggest continuing disability. "We are aggressively appealing this case."

Bourhis has made effective use on court of a 1995 memo by a claims manager at a pre-merger Provident Corp., trumpeting the benefits to the company of ERISA preemption.

"The economic impact on Provident from having policies covered by ERISA could be significant." The manager wrote, "As an example, (another company official) , identified 12 claim situations where we settled for $7.8 million in the aggregate. If these 12 cases had been covered by ERISA, our liability would have been between zero and $0.5 million.

The memo adds, "While our objective is to pay all valid claims and deny invalid claims, there are gray areas, and ERISA applicability may influence our course of action."

UnumProvident issues a "key messages" statement explaining the memo after the Wall Street Journal published excerpts from it in January.

"The intent of the business communication was to outline corporate needs related to the proper management of ERISA claims," the company said. "UnumProvident maintains full compliance with ERISA guidelines.

Bourhis insists the situation is so serious the law should be changed and consumers warned.

"Insurance companies issuing ERISA preempted policies are completely immunized from fraudulent sales or claims practices." Bourhis argued in a March 20 letter to Garamendi.

"In spite of the seriousness of this situation, very few employers and employees in this state have ever heard of ERISA preemption or its consequences.

"I believe that if this warning is effectively issued, enterprising insurance carriers will soon offer a competitively priced non-ERISA pre-empted group policy available to employees wishing to avoid this problem."

Garamendi spokesman Norman Williams last week cast cold water on the consumer-warning idea.

"We're not confident that Mr. Bourhis' suggestions would be an appropriate way to handle this. We're still looking for a solution to the ERISA issue," he said.

In another rebuff, Bourhis was dumped from a continuing legal education program he was scheduled to deliver for the American Conference Institute last week in Boston after he announced he would discuss his successful lawsuits against UnumProvident.

His provocative title: "Unanimous verdicts, Punitive Damages, Federal Court Injunctions: What's Next for UnumProvident?"

Institute President Toby Belman said the seminar on litigating disability claims was intended to present balanced perspectives.

"He was going to be inflammatory," Belman said, " We don't have to provide a forum for anyone who has an ax to grind."

Bourhis suspects lawyers with ties to UnumProvident and its Paul Revere subsidiary are behind his muzzling, a claim Bleman denied.

"We've been banned in Boston, "Bourhis said, " The home of the original Paul Revere is hardly a place to be shredding the First Amendment."

Along with the Hangarter case, Bourhis in 2001 won a $1.3 million federal jury verdict for Susan McGregor, a longtime court reporter for now-retired San Francisco superior Court Judge Alfred G. Chiantelli.
The Paul Revere Insurance Co. paid her disability benefits for four years after repetitive stress disorders forced McGregor from her courtroom duties. Then it concluded she wasn't totally disabled because she could perform one reporter's task, proofreading.

"Who are they kidding?" Bourhis asked. McGregor v. Paul Revere Life Insurance Co. C97-2938PH.

Earlier this month Bourhis fired off letters to UnumProvident attorneys blasting the company for its continued refusal to pay disability benefits to Hangarter and McGregor.

He cited California Insurance Code Section 790.03(h)5, which requires an insurer to pay benefits when its responsibility to do so is "reasonably clear."

"This requirement is not excused by an insurer's filing of a declaratory relief action or appeal," Bourhis wrote."The unanimous opinions of the jurors and the trial judge make the company's duty to pay even more obvious."

In the letters he threatens further bad-faith lawsuits unless UnumProvident pays up.

Asked by a reporter about the letters, UnumProvident spokeswoman Stacy Gray said the company would stand by its statement about plaintiffs attorneys who stand to gain financially by criticizing the company.

Bourhis retorts that UnumProvident's critics include such neutrals as U.S. Magistrate Judge James Larson, who in a stinging 62-page opinion last fall upheld the Hangarter verdict and offered this assessment of UnumProvident's conduct in ending her $8,150/monthly benefits.

"'Defendents had a bias against claims like Dr. Hangarter's. They planned to save money by terminating claims like hers."

Larson declined to fashion a consent decree or to investigate allegations by other policyholders, as Bourhis had asked. But the judge clearly was upset by abuses disclosed by the evidence.

"The court, "Larson wrote, "finds it more appropriate in this instance to other defendants to obey the law, and hereby enjoins them from future violations, including but not limited to targeting categories of claims or claimants, employing biased medical examiners, destroying medical reports and withholding from claimants information about their benefits."

Bourhis asserts that adverse jury verdicts are irrelevant to the company's business plan because they have little or no effect on the bottom line.

The manuscript quotes an allegation by Eugene R. Anderson, a founding shareholder in Anderson Kill and Olick, a New York law firm specializing in insurance coverage. Anderson asserts that UnumProvident has figured out ways to recoup litigation losses through offshore reinsurance policies that compensate the company for its punitive damage payouts.

California's Insurance Code Section 533 prohibits indemnification for punitive damages. No such stature inhibits insurance for punitive in UnumProvident's home state, Tennessee.

UnumProvident also has a Plan B, the book asserts, quoting Anderson, "to the extent that they haven't insured for it, I think they actually write off punitive damages on their tax returns! Treating them as a "business expense."

If true, Bourhis writes, litigation become beside the point.

Anderson, in a telephone interview from his office in New York, confirmed Bourhis' suspicion. "After 30 years in the business, I can tell you unequivocally that any big company can trot itself off to Bermuda and buy a punitives policy that isn't governed by state laws. Isn't secrecy wonderful?"

UnumProvident declined to respond to questions about punitives insurance.