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Friday, July 19, 2024 | Back issues
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Class Claims Insurer Pulled a Fast One

(CN) A Boston-based insurer preyed on disabled policyholders, fraudulently inducing them to grant liens that allowed the company to recoup from Social Security or Workers Comp the benefits it paid, according to a class action in Oklahoma City Federal Court.

Lead plaintiffs Larry Fortelney and Brandon Stoup sued Liberty Life Assurance Co. of Boston; the Bassett Law Firm; Bassett, Nelson & Associates; Greta Bassett; and John R. Nelson. Bassett and Nelson are attorneys Liberty employed on "behalf" of its policyholders, according to the complaint, which claims the defendants conspired to violate state and federal laws to collect the payments.

Other causes of action include fraud, deceit, breach of contract, breach of fiduciary duty, conversion, unjust enrichment, and violation of the Fair Debt Collection Act.

Fortelney and Stoup were injured at work and each was told he was qualified for long-term disability benefits. Both say the insurer provided them with a fact sheet that said their policy required them to apply for Social Security disability benefits or workers compensation.

They say the fact sheet states that much of the initial money paid out by Liberty was "advanced to you while you were awaiting [the relevant agency's] decision, and you must pay it back to Liberty immediately."

This was just one of a raft of misleading statements on the sheet, intended to make the policyholder think Liberty advanced them money to which they were not otherwise entitled, according to the complaint.

The fact sheet also said that if a Liberty case manager determined the policyholder needed assistance to secure government benefits, a lawyer would be provided at no cost. This service "frees them from the frustration of repaying the insurance company" on their own, the complaint states.

In reality, Fortelney and Stoup say, the scheme is intended to ensure that Liberty's policyholders get Social Security benefits to pay to Liberty. That's because policyholders are made to sign an agreement stating Liberty has a first lien on all such benefits until the insurer is repaid in full for payments it has made.

The class claims this violates the Social Security Act, which prohibits the transfer or assignment of Social Security benefits; and the Oklahoma Workers Compensation Act, which prohibits benefits from being subject to levy, attachment or other remedies related to the recovery of a debt.

The defendant lawyers have "unavoidable conflicts of interest in their dual representation of Liberty and its policyholders," the class claims. "Furthermore, the lawyers provide little actual service with regard to the overpayment because Liberty calculates the overpayment and the lawyers simply rubber stamp it. The lawyers rarely, if ever, attempt to negotiate down the lien claimed by Liberty."

Both Fortelney and Stoup say they received balloon payments from government agencies, then had to write checks for nearly the full amounts to the insurer. They say these payments were based on grossly overstated alleged overpayments by the insurer.

They seek actual and punitive damages and injunctive relief.

They are represented by William Federman and Jennifer Montagna with Federman & Sherwood in Oklahoma City.

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