'Colossus' class action costing defendants more than $293 million

Michelle Massey, East Texas Bureau Aug. 2, 2007, 6:41am

TEXARKANA, Ark. -- Proposed and approved settlements from Miller County Circuit Court's infamous "Colossus" class action could cost defendants more than $293 million.

Following the original complaint filed against Computer Sciences Corporation, some defendants have decided to settle and avoid the ever expanding costs of litigation.

After working three years on the lawsuit, plaintiffs' attorney John Goodson of the law firm Keil & Goodson, P.A., from Texarkana, Ark., could collect over $65 million from those currently settling insurance companies.

In the class action complaint, the plaintiffs alleged that a colossal amount of insurance companies have used or currently use Computer Science's software program Colossus to engage in conspiracies to systematically undervalue bodily injury claim settlements.

Plaintiffs' attorneys describe the software as a "cost containment tool" used to "enhance their (the insurance companies) profits at the expense of first party insured." The suit faults the defendants for civil conspiracy, breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, and fraud.

Originating from the Government Insurance Office of Australia, Colossus was first licensed in the United States in early 1990. The Colossus program is currently licensed to more than 20 insurers.

The original Miller County Colossus case was filed on Feb. 7, 2005, by the plaintiff Georgia Hensley, individually and as class representative.

Slowing the proceedings for the past few months, both parties have fought over production of evidence. On behalf of defendant State Automobile Insurance Company, attorneys Mark Burgess and Jason Horton of Texarkana, Texas, have filed pleadings stating that their client would not produce documents which contained confidential information.

Despite the attorneys' best attempts, on July 11, Judge Johnson ordered State Auto to produce the documents.

Other defense attorneys representing State Farm, Nationwide, and Allstate have continued to seek protective orders concerning non-public personal information, such as personal financial or health information.

Also to their dismay, Judge Johnson found that a previous protective order was sufficient protection and that the defense may no longer withhold documents. Judge Johnson states the documents should be designated "confidential" and shall be destroyed on expiration of all appeals.

Currently, the case proceedings have decelerated as defendants, such as Berkley Insurance and Federated Insurance Companies, obtain dismissal to start settlement proceedings.

Continuing with allegations of civil conspiracy and fraud, on July 10, named plaintiff Martha Hogue's attorney John Goodson filed suit against the previously dismissed Hensley defendant, Federated Mutual Insurance Company and Federated Service Insurance Company.

The suit states that the defendants' use of Colossus and other software, COA, which was developed by Policy Management Systems and Injury IQ, developed by Claim IQ, Inc., paid less than the Plaintiffs were "legally entitled to recover as damages from the owner or operators of an uninsured or underinsured motor vehicle."

In reply the defendants filed an answer that admits use of Colossus "for evaluation of damage in first party and third party bodily injury claims," but the defendants did not use COA or Injury IQ.

The defendants' response continues with a motion to dismiss which maintains that the plaintiffs' complaint fails to state facts and fraud claims. In addition, defendants' assert that jurisdiction is inappropriate as Federated Mutual Insurance is located within Minnesota.

Prior to a ruling on the motion to dismiss, a stipulation of settlement was filed. The proposed settlement states over $1.2 million for injunctive relief and another $625,000 for attorney fees and costs.

A hearing to discuss the settlement is set for Oct. 15. Judge Johnson will preside of the case.

Other "Hensley Action" defendants, WR Berkley Corporation, Berkley Regional Insurance, Union Standard Insurance Company, Acadia Insurance, Continental Western Insurance and Great River Union Insurance Company have started settlement proceedings.

On behalf of named plaintiff Glenn Gross, attorney Matt Keil filed another Miller County Circuit Court suit on July 6. The stipulations for the proposed settlement will award $542,649 to class members and $325,590 for attorney fees and costs. A preliminary fairness hearing is set for Oct. 15. Judge Johnson will preside.

Other proposed settlements for Hensley defendants include:

Hunsucker vs. American Standard Insurance Company. Defendants are accused of "lowballing" bodily injury claims through their use of Colossus.

A preliminary settlement approval hearing is set for Aug. 10. Proposed settlement fees include over $52 million for class members and over $27 million for attorney fees and costs.

Filed on April 10, Judge Johnson will preside.

In Sweeten vs. American Insurance Company, class settlement stipulations include $3 million in attorney fees and costs, an incentive fee to plaintiff for $5,000 and supplement UM for eligible class members not to exceed policy limits. The settlement approval hearing is scheduled for Aug. 10 with Judge Johnson presiding.

In Easley vs. Ohio Casualty Insurance Company, the proposed settlement stipulations include $4 million in attorney fees and costs and over $5.9 million to supplement UM cash payment to eligible class members not to exceed policy limits.

The settlement approval hearing is scheduled for Aug. 6 with Judge Johnson presiding.

In Johnson vs. Clarendon America Insurance Company, preliminary settlement stipulations call for $744,418 for class members and $429,901 in attorney fees and costs.

Approval hearing is set for Aug. 6 in Judge Johnson's court.

In Atkinson vs. General Casualty Company of Wisconsin, a proposed settlement states stipulations including $2.7 million for class members and $1.6 for attorney fees and costs. Hearing is scheduled for Aug. 10 with Judge Johnson.

Settled Miller County Colossus cases include:

Gross vs. Graphic Arts Mutual Insurance, Republic Franklin, Insurance and UTICA. Approved on June 22, the total settlement including payments and attorney fees is over $2.7 million. Of that settlement, Judge Johnson awarded plaintiff's attorney $500,000.

Hunter vs. American Central Insurance Company. Settlement includes an incentive fee to plaintiff for $5,000, $1.8 million to class members and over $1.07 million in attorney fees and costs.

Zareboki vs. Hartford Insurance. Approved on Feb. 13, eligible class members will receive over $215 million and plaintiffs' attorney John Goodson was awarded $26 million for attorney fees and costs.

While admitting use of the Colossus software, those settling insurance companies continue to deny the plaintiffs' allegations.

The insurance companies describe settlement as a means of avoiding rising litigation costs. The total of over $293 million proposed and approved settlements for only a small percentage of the insurance companies appear to justify their claim. Litigation can be a long and expensive process.

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