HOUSTON – Several high-profile Texas law firms have been sued by a group of insurers, all of which claim the lawyers dipped into asbestos trusts and then failed to reimburse them for millions of dollars for medical coverage provided to their clients.
Plaintiffs Humana, United Healthcare and Aetna filed suit against defendants Brent Coon & Associates, Reaud Morgan & Quinn, the Bogdan Law Firm, Foster & Sear, Hissey Kientz and Shrader & Associates on Sept. 6 in the U.S. District Court for Southern Texas, Galveston Division.
The insurers maintain they have provided benefits to plan members who suffered injury due to asbestos exposure and have a contractual right to be reimbursed.
“Having received the benefits of their bargain (the medical care), the plan members and the attorneys representing them are now sidestepping the burdens of that bargain (the obligation to reimburse their health plan),” the suit states, adding that the defendant law firms know a portion of the recovery “rightfully and lawfully” belongs to the insurers.
The insurers assert the defendant law firms have represented thousands of claimants and have recovered millions of dollars from companies through litigation. And while some asbestos claims are pursued in court, the majority are submitted to asbestos bankruptcy trusts.
“Unfortunately, the opacity of bankruptcy trusts prevents the plaintiffs from protecting and pursuing their subrogation and reimbursement rights,” the suit states.
“Claims are submitted to the trusts under a cloak of secrecy. Specifically, there is no public disclosure of who submits a claim against a trust, the plaintiffs receive no notice when claims are submitted or resolved, and there is no judicial oversight or public disclosure of the claims evaluation or resolution process.
“Additionally, there is no public disclosure of who gets paid, how much they get paid, and from which trust(s) they get paid.”
Once a trust approves a claim, funds are paid to the law firm, which deducts its attorney’s fees before distributing the remaining funds to the client, according to the lawsuit.
“Similar to the submission and resolution of the claims with the trusts, these payments are made without providing notice to the plaintiffs, which substantially impairs the plaintiffs’ ability to recover the amounts that are legally owed to them,” the suit states.
“Despite the secretive nature of this system, the plaintiffs have been able to identify at least 297 matched asbestos claimants, i.e., those claimants who (1) are or were represented by at least one of the defendant law firms in seeking compensation for their asbestos-related injuries, and (2) on whose behalf the plaintiffs paid to treat the asbestos-related injuries for which they recovered.
“The plaintiffs have also determined that they have paid an aggregate of over $19.5 million to treat asbestos-related diseases. This sum represents the aggregate lien amount owed to the plaintiffs by the matched asbestos claimants.”
The defendant law firms are bring accused of “unjustly enriching” themselves and their clients.
“There is very little information publicly available concerning the identities of asbestos claimants who submit and/or resolve their asbestos-related claims through asbestos trusts,” the suit states. “In fact, it is not possible through reasonable diligence to identify more than a fraction of the claimants who received payments from the asbestos trusts.”
The insurers health plans require members to notify them when they initiate or settle claims for injuries the insurers paid to treat.
“From 2006 through 2012, asbestos trusts paid out more than $15 billion, resolving hundreds of thousands of asbestos-related claims,” the suit states.
“Therefore, because the plaintiffs represent a substantial portion of the United States’ population, they should have received tens of thousands of notices from their members or their members' attorneys. Despite same, however, they have received only a handful.”
Asbestos litigation began 40 years ago. More than 100 companies have sought bankruptcy protection as a means of dealing with the lawsuits, the suit states.
The insurance companies seek all available relief under the Employee Retirement Income Security Act, in addition to the amounts paid to treat the clients of the asbestos law firms.
The plaintiffs also seek the imposition of a constructive trust over a portion of the total asbestos recovery made by each matched asbestos claimant in an amount necessary to fully reimburse them.
Furthermore, the plaintiffs seek the imposition of an equitable lien to enforce the reimbursement and subrogation terms of the plans for which they provide insurance or claims administration services.
They are represented by Jon Thomas and Abbie Sprague, attorneys for the Houston law firm Hicks Thomas.
Case No. 3:16-cv-00240