Insurer claims health system ‘unjustly enriched itself’

A top insurer, being sued to force it to cover a settlement over retirement plans, insists that the company used the plans to enrich itself

Insurer claims health system ‘unjustly enriched itself’

Insurance News

By Ryan Smith

A health care system suing Chubb paid itself “excessive” amounts from employee retirement programs and “unjustly enriched itself,” the insurer claims.

Chubb, under the name Federal Insurance Company, is one of two insurers being sued by North Carolina-based Novant Health, according to a report by The Charlotte Observer. Novant is suing the insurers in an attempt to force them to cover a settlement with Novant employees over retirement plans. The $32 million settlement stems from a 2014 lawsuit that claimed Novant charged employee retirement plans millions of dollars in excessive fees.

Chubb, responding to Novant’s lawsuit against it, claimed that the health care system allowed third parties to charge exorbitant fees for retirement plan services. One contract in particular – with D.L. Davis & Company – required Novant to pay the provider a monthly fee “far in excess” of the value of the services it provided, Chubb maintained.

Chubb also alleged that the D.L. Davis contract benefitted Novant and some of its executives, the Observer reported. According to Chubb, Novant and the executives had business ties with D.L. Davis founder Derrick L. Davis dating at least to the 1990s. Davis formed D.L. Davis specifically to provide services to Novant’s retirement plan, Chubb alleged. The health care system and its executives benefited from the arrangement “insofar as it incentivized Davis to engage in separate business dealings with, and contributions to them, to their financial advantage,” Chubb said.

Novant claimed in its lawsuit against the insurer that it terminated D.L. Davis’ services in December of 2015. It also claimed that its retirement plan didn’t always have sufficient funds to cover fees each month, the Observer reported. Novant said that it paid vendors and received reimbursement from the plan rather than forcing plan participants to pay vendor fees as monthly deductions from their accounts.

“Novant received no financial benefit from this arrangement,” the company said.

But Chubb alleged that Novant wasn’t just reimbursing itself.

“Novant did not merely extract from the plan an amount of money representative of services provided on behalf of Novant to plan participants; rather, Novant took excessive amounts to which it had no legal entitlement,” Chubb said in its court filing.

Novant strongly denied the insurer’s claims, the Observer reported.

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