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Posted On: Apr. 6, 1997 12:00 AM CST


UNIONDALE, N.Y.-Korean Air Lines has filed a motion to set aside a $2.1 million verdict to the father of a college student killed by the downing of Korean Air Lines Flight 007 in 1983.

The verdict was based on the claim that the plaintiff, Alice Ephraimson-Abt, experienced pain and suffering while the plane plummeted toward the sea after a Soviet missile struck it off Sakhalin Island. Verdicts based on pre-death pain and suffering in airline crashes are rare, lawyers say.

Generally, awards to the surviving family of plane crash victims are based on the deceased's future earnings. But because Ms. Ephraimson-Abt was in college, that was inapplicable.

Of the verdict, $2 million was for Ms. Ephraimson's pre-death pain and suffering, while $135,000 was for her father's loss.

Previous awards in airline crashes that have been based on pain and suffering prior to the crash have not been this large, said Lee Kreindler of Kreindler & Kreindler in New York. He frequently represents crash victims but did not represent the plaintiff in this case.

The attorney for the airline, George Tompkins Jr. of Tompkins Harakas Elsasser & Tompkins in White Plains, N.Y., said this verdict is the largest from Flight 007 for pre-death pain and suffering, surpassing the previous high of $1.3 million.

CNA faces suit over ADA

CHICAGO-The Equal Employment Opportunity Commission is suing CNA Financial Corp. for allegedly discriminating against people with disabilities.

According to a lawsuit filed by the federal agency's Chicago office last week, CNA and subsidiary Continental Casualty Co. allegedly refused to reasonably accommodate and ultimately fired a former computer programmer who suffered from a herniated cervical disk.

In a statement, the EEOC also alleges the insurer discriminated against disabled individuals as a class because the company "adheres to a policy that requires a person returning to work to be able to immediately resume what CNA describes as all 'normal' work activities without regard to whether the employee needs a reasonable accommodation."

The claims against CNA were brought under Title I of the Americans with Disabilities Act of 1990.

A spokesman for CNA said, "We strongly believe we have fully complied with the law."

This is an important case because "It asserts rights of employees to work even though they may need accommodations," said Jean P. Kamp, an EEOC supervisory trial attorney.

The agency said it will seek injunctive relief, back wages, reinstatement and compensatory and punitive damages for the individual and the class of persons affected by the policy.

$675 million in cat damage

RAHWAY, N.J.-Catastrophes caused an estimated $675 million in insured property damage during the first three months of this year, according to the Property Claim Services division of the American Insurance Services Group.

Nearly 40% of the total-$265 million-stemmed from a series of storms that devastated portions of the South and Ohio River Valley during the end of February and early March, according to PCS (BI, March 10). PCS also reports that catastrophe-related claims for the first quarter of this year reached an estimated 364,000, a relatively low volume.

This year's first quarter ranks as the seventh-costliest on record in terms of total damage. The costliest first quarter was in 1994, when the Northridge Earthquake in California played a key role in pushing insured property damage to $14.5 billion.

Much of tobacco suit dismissed

MIAMI-A Florida state court judge dismissed most of a class-action suit seeking billions of dollars in damages against the tobacco industry.

The judge threw out claims seeking money for smoking-related illness. Those claims concerned allegations that the tobacco industry failed to warn about the risks of smoking, concealed its addictiveness and used advertising to hide the risks.

Circuit Court Judge Alan Postman determined, based on U.S. Supreme Court precedent, that these claims were pre-empted by the federal law that mandates warnings on tobacco labels.

The decision lets stand claims for design defect, fraud and those against the Council for Tobacco Research, an industry research group.

Robert Heim, an attorney with Dechert Price & Rhoads in Philadelphia, who represents Philip Morris Cos., said the decision "is a victory, but not one that will end the lawsuit." He added that numerous federal courts have arrived at the same decision.

A trial on the remaining claims is scheduled to start in September.

Meanwhile, Circuit Court Judge Irene Berger in West Virginia has allowed the remaining two claims in the state's suit against the tobacco industry to proceed. Those two claims are for breach of West Virginia's consumer protection and antitrust laws. In February, she had dismissed most of the state's claims seeking reimbursement for health care costs (BI, Feb. 24). The state will appeal that ruling.

Also, Liggett Group Inc.'s settlement with 22 state attorneys general has been extended to include California, San Francisco and 10 California counties. Although California has not sued any tobacco companies, it will participate on the same terms as the other states in the settlement reached last month and will receive documents and assistance from Liggett employees if the state pursues litigation against other tobacco manufacturers, as well as receiving part of any settlement fund. San Francisco and the counties will obtain the same assistance with their suits but will not participate in the monetary fund.

Kroll to continue AIG role

NEW YORK-Security consultant Kroll Associates will continue to serve as a consultant to American International Group Inc. after its expected sale to Atlanta-based Equifax Insurance Services Group.

Equifax plans to spin off its insurance services group this summer, after which the spinoff company will acquire New York-based Kroll. The newly created company will be called ChoicePoint.

The terms of the transaction were not made public.

Kroll is a 25-year-old security consultant that provides services to AIG policyholders and others.

Ruling threatens Blues merger

NEWARK, N.J.-Blue Cross & Blue Shield of New Jersey will appeal a court ruling that creates a serious snag in its effort to merge with Anthem Inc., a large for-profit health insurer based in Indianapolis.

New Jersey Superior Court Judge Alvin Weiss declared last month that the New Jersey Blues, under state statute, is a charity. The plan therefore would most likely have to form a large charitable foundation to be permitted to convert to a for-profit mutual company. The Blues plan brought the case to court, seeking a declaratory judgment.

Consumer groups have estimated the New Jersey plan might be required to set aside as much as $1 billion for charity, though Banking and Insurance Commissioner Elizabeth Randall has not yet ruled on the matter. Ms. Randall has been reviewing the matter at the same time it has been in the courts.

"The company was disappointed with the court ruling but didn't consider it a surprise," a spokesman for the Blues plan said, adding that this ruling is "the first round."

"Blue Cross & Blue Shield of New Jersey is not a charity, and it's never been one," he said.

The plan may, if necessary, ask the state Legislature to specify that it is not a charity, he said.

In other Blue developments, Owings Mills, Md.-based Blue Cross & Blue Shield of Maryland last month signed a definitive agreement with Washington-based Blue Cross & Blue Shield of the National Capital Area. The two not-for-profit plans intend to combine under a newly created not-for-profit holding company.

Company to terminate pension

WEST ALLIS, Wis.-Allis-Chalmers Corp. has notified the Pension Benefit Guaranty Corp. that the company intends to terminate its underfunded pension plan, which has about 9,800 participants.

Allis-Chalmers, which in the 1960s was one of the largest private employers in Wisconsin, now has just two employees, while a subsidiary, which repairs equipment Allis-Chalmers once made, has only several dozen workers.

Estimates of its pension plan's unfunded liability range from $15 million to $30 million. In 1985, the PBGC took over another Allis-Chalmers plan, which had $170 million in unfunded liabilities and at the time was the biggest loss the PBGC had incurred.

Sodarcan to sell division

MONTREAL-Sodarcan Inc. is selling its brokerage division that handles small commercial accounts and personal lines business.

Current management of the Dale-Parizeau division of Dale-Parizeau International Inc. is buying the division for an undisclosed amount. The division's business represents 30% of the total volume of Dale-Parizeau International and 17% of Montreal-based Sodarcan's business. The brokerage has not released 1996 revenues, but based on 1995 revenues, the division generated about $12.5 million.

Dale-Parizeau International will continue to handle large, complex commercial lines brokerage accounts.

The sale is part of a strategic review of Sodarcan's brokerage operations, said Denise Chabot, vp-finance and treasurer at Sodarcan.

Briefly noted

Aon Group Inc. and Centre Reinsurance (U.S.) have sealed a $100 million catastrophe equity put program with Horace Mann Educators Corp. that will help recapitalize the Springfield, Ill.-based insurer in the event of a large catastrophic loss. A similar program was sold to RLI Corp. of Peoria, Ill., last year (BI, Oct. 14, 1996). . . .Lloyd's of London reinsurer Equitas Holdings Ltd. has appointed Scott P. Moser as its claims director effective May 1. Mr. Moser, currently president of Envision Claims Management Corp. of New Jersey, succeeds Jim Teff, who is resigning because of his wife's poor health. Mr. Teff will become a full-time consultant to Equitas, concentrating on major claims. Mr. Moser, who also will join the board of Equitas, is a lawyer with an extensive background in environmental, pollution and asbestos-related claims, which are the bulk of the liabilities Equitas is reinsuring for Lloyd's syndicates. . . .Bayer Corp. will appeal the $2 million verdict awarded in Indianapolis last month to a couple whose son died of AIDS from HIV-tainted blood clotting products for hemophiliacs. Also, in Houston, two other manufacturers of the blood products, Alpha Therapeutic Corp. and The Armour Pharmaceutical Co., were found not liable in separate trials over the products. . . .Foundation Health Systems Inc., the company created just last week with the merger of Foundation Health Corp. and Health Systems International Inc., said it has acquired Advantage Health, a Pittsburgh-based group of managed health care companies, for $12.5 million in cash. . . .The combined ratio for workers compensation climbed to 101% in 1996, up from 97% in 1995, according to preliminary estimates from the National Council of Compensation Insurance in Boca Raton, Fla. However, premium volume dropped 5% to $24.9 billion in 1996, as employers continue to self-insure or use large-deductible plans. . . .United Air Lines Inc. is appealing a $3 million wrongful termination verdict awarded to a former Oakland, Calif., worker who claimed he was discriminated against because of his Muslim faith and dismissed after complaining about fellow workers' anti-Muslim comments. . . .Kohlberg Kravis Roberts & Co. is giving financial backing to James R. Fisher, the former chief financial officer of American Reinsurance Co., to set up Fisher Capital Corp. in Princeton, N.J. Mr. Fisher will advise KKR on insurance industry investments.