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CAMDEN, N.J.-A class-action federal fraud suit brought by a group of insurers against manufacturers of polybutylene piping could go to trial as early as next January, according to an attorney for the insurers.

U.S. District Court Judge Joseph Rodriguez on July 15 rejected the defendants' motion to decertify the class.

Stewart C. Crawford of Stewart C. Crawford & Associates of Media, Pa., who represents the insurers, said the group of insurers now can seek damages under the federal Racketeer Influenced and Corrupt Organizations Act. The insurers allege that the three manufacturers engaged in "a pattern of racketeering" in devising "ways to conceal known and existing problems with (polybutylene) piping," according to court papers.

The insurers are suing to recover hundreds of millions of dollars they paid policyholders for leaking piping manufactured by Shell Oil Co., Hoechst Celanese Corp. and E.I. DuPont de Nemours & Co. (BI, Feb. 16).

Mr. Crawford said the case, Northland Insurance Co. vs. Shell, DuPont and Hoechst Celanese, is the first in which a group of insurers has been certified as a class in a class-action suit. He estimates insurance industry losses due to leaking polybutylene pipe at more than $2 billion.

Kaiser sued again in Texas

AUSTIN, Texas-Kaiser Foundation Health Plan of Texas is facing a second lawsuit from the attorney general of Texas, this time claiming the health maintenance organization has improperly denied emergency care and claims.

The suit, filed earlier this month in state court in Austin, Texas, alleges Kaiser has violated a 1995 settlement agreement regarding its emergency care practices.

In that settlement of a 1994 suit, Kaiser agreed to hire a consultant to reprocess some claims filed by policyholders who were denied benefits for emergency care from June 1, 1992, through Oct. 1, 1994. The HMO also agreed to revise its emergency claims review criteria.

The new lawsuit seeks civil penalties of up to $10,000 per violation and damages payable to claimants who suffered losses because of Kaiser's emergency care practices.

Kaiser said in a statement that it believes its "claims processing practices meet state laws and regulations, and we expect to win this case on its merits accordingly. Our members have the right to expect that their emergency claims benefits will be properly administered."

Last year, Kaiser reached a separate agreement with the Texas Department of Insurance, in which it agreed to pay a $750,000 fine and make changes to its emergency care practices (BI, April 28, 1997).

CIGNA HealthCare fined

DENVER-Colorado Insurance Commissioner Jack Ehnes slapped a $116,000 fine on CIGNA HealthCare of Colorado Inc. for various state insurance violations relating to its 1995 and 1996 business years.

In addition to policy form and producer credentialing violations, the health maintenance organization was fined for failing to handle complaints and grievances, including failing to respond to written appeals within the time frames set forth in its own internal standards, the department said. The examiners also reported 19 categories of errors relating to CIGNA's underwriting and rating practices.

The fines, levied against CIGNA earlier this month, came at the same time the Insurance Department fined Connecticut General Life Insurance Co. $10,000 for policy form and producer credentialing violations.

In a statement, Mr. Ehnes said that market conduct examinations "revealed systematic problems throughout the companies" and that the "high frequency of errors is an issue of real concern and will necessitate a follow-up examination within 18 months to ensure that these problems have all been corrected."

Deryl Edmonds, general manager of CIGNA HealthCare of Colorado, said all the issues identified by the examiners have been corrected. Despite the violations, Mr. Edmonds said, no consumers or clients were harmed in any way.

Ireland sets new tax rate

DUBLIN, Ireland-An agreement between the Irish government and the European Union on a new corporate tax rate eliminates uncertainty over the tax position of captive insurance companies in Dublin, Ireland.

Captives operating out of Dublin's International Financial Services Centre now are subject to a European Union-approved 10% corporate tax rate.

That rate runs out at the end of 2005. The new tax rate, approved by the European Union last week, is 12.5%. Existing captives will remain entitled to the 10% rate until the end of 2005. Captives formed after July 22 will be subject to the 10% rate until the end of 2002, after which they will be subject to the 12.5% rate. Currently, there is no expiration date for the new rate.

David Smith, a marketing executive at the government-run Industrial Development Agency of Ireland, which promotes international investment in Ireland and oversees the marketing of the IFSC, said the new tax agreement sends a very positive message to captives operating, and seeking to operate, out of the IFSC.

Captives formed in the IFSC can cover operations across Europe- with the exception of Ireland-under the European Third Life and Non-Life Directives, both for direct and reinsurance business.

Mr. Smith said that captives are looking for tax certainty and that the slight increase in the tax rate is not an issue. He said he thinks the new tax agreement will ensure the future growth of the IFSC, which now has more than 140 captives.

Eamon O'Brien, managing director of Aon Insurance Managers (Dublin) Ltd. and chairman of the IFSC's insurance group, said he agrees that the new tax agreement will boost Dublin's attractiveness as a captive insurance domicile. "We are delighted it has now been finalized," he said.

AOL subpoenaed for user ID

SANTA ANA, Calif.-A publishing company successfully obtained from an Internet service provider the name of a person who set up what the publisher alleged was a defamatory World Wide Web site.

The move endorses what is becoming standard procedure among Internet service providers: that they will give up names of users only when forced to by court action, said Nicole Wong, an attorney at Hosie, Wes, Sacks & Brelsford in Menlo Park, Calif.

Freedom Communications Inc., the Irvine, Calif.-based parent company of the Orange County Register in Santa Ana, Calif., subpoenaed America Online Inc. for the name of a person who created a Web site that Freedom said contained defamatory statements about Register employees.

Dulles, Va.-based AOL followed its standard procedure, withholding information until it was obliged to release it by a court order, said a spokesman for the Internet service provider.

In another Internet-related case, New York University filed a complaint earlier this month seeking an injunction against a Web site operator that allegedly showed photographs of scantily clad women it said were taken with a secret camera in a university dormitory.

Contrary to what the site said, the photos were not of NYU students, the university said. The Web site operator removed the NYU name from the site after the suit was filed, an NYU spokesman said.

Carnival insured for damages

MIAMI-Carnival Corp. is insured for damages from a fire last week aboard one of its cruise ships, though it has not yet assessed the damages.

Howard Frank, vice chairman and chief operating officer of the Miami-based cruise line operator, said in a statement that it is "premature to assess exact damages."

A Carnival spokesman, who said the company has insurance to cover the losses, was unable to provide the names of the insurers.

The company is investigating the incident, the spokesman said late last week.

The July 20 fire broke out on the ship's aft mooring deck, which houses the laundry room, and spread to two higher decks. The ship, the M.S. Ecstasy, was carrying 2,575 passengers and about 900 crew members on the first day of a four-day cruise to Key West, Fla., and Mexico. It had just left Miami when the fire began.

No major injuries were reported; approximately 50 crew members trying to extinguish the flames were treated for smoke inhalation.

Passengers were accommodated in several Miami hotels at Carnival's expense. Carnival also is providing a full refund and a free future cruise to all passengers. Cruises that were to begin July 24 and July 27 were canceled, and those passengers will receive full refunds and a 50% discount on any cruise before Dec. 15, 1999.

The ship will undergo repairs and is expected to re-enter service July 31, according to a corporation statement.

Briefly noted

Employers throughout California will receive workers compensation premium refunds after Insurance Commissioner Chuck Quackenbush last week denied a motion to reconsider a finding that the State Compensation Insurance Fund improperly inflated medical legal expenses resulting in inflated experience modifications. The final amount of refunds has yet to be determined. . . .The tobacco industry has reached a final settlement with Texas, agreeing to pay $17.3 billion to end the suit, which called for recovery of costs for treating smoking-related illnesses. . . .A recent Iowa state court ruling gave a green light to a proposed merger between Des Moines, Iowa-based Allied Mutual Insurance Co. and Columbus, Ohio-based Nationwide Mutual Insurance Co. The court found no evidence that Allied policyholders would be hurt by the transaction. . . .Two securities firms will pay Orange County, Calif., $117.5 million to settle a suit filed by the county in connection with the collapse of a county-run investment pool in 1994. Both Morgan Stanley Dean Witter & Co., which agreed to pay the county $69.6 million, and Nomura Securities International, which will pay $47.9 million, denied any wrongdoing in connection with the pool's collapse, which stemmed from a risky investment strategy and resulted in $1.6 billion in losses, leading the county to sue brokers, consultants and others that did business with the fund. . . .Risk Capital Holdings Inc. and Securitas L.L.C. are leading an investment group that plans to invest up to $75 million in PennCorp Financial Group Inc., the New York-based insurance holding company. PennCorp's subsidiaries offer life insurance and accident and sickness insurance. . . .Richard J. Quagliaroli has been promoted to president of the commercial insurance operations of Hartford Financial Services Group to replace William Stanway, who will retire. Mr. Quagliaroli was previously executive vp of sales and regional operations for Hartford Commercial. . . .Jay S. Fishman, now vice-chairman of Travelers Property Casualty Corp. and chief executive officer of its Commercial Lines business, will become the company's president and chief executive officer with the formation of Citigroup, which is expected to be completed before the end of the quarter. Robert I. Lipp, now chairman and CEO, will remain chairman as well as become co-chief executive officer of Citigroup's Global Consumer Business. . . .On July 16, the Massachusetts Supreme Court upheld a 1996 judgment awarding $2.5 million in damages to a 69-year-old woman who claimed silicone gel breast implants made by Baxter Healthcare Corp. made her sick. . . .A U.S. District Court judge in Los Angeles on July 13 granted class-action status to a group of San Fernando Valley and Simi Valley residents suing Rocketdyne over contamination allegedly caused by its Santa Susana Field Lab. . . .Odwalla Inc. pleaded guilty to shipping apple juice contaminated with E. coli and will pay a $1.5 million fine in an agreement with the U.S. attorney. A 1996 E. coli outbreak blamed on the company's juice killed one child and sickened dozens. . . .U.S. District Judge Constance B. Motley late last week approved a revised sexual discrimination and harassment settlement ending the two-year-old lawsuit brought against Salomon Smith Barney Inc. by a class of current and former women securities brokers (BI, Nov. 24, 1997). Judge Motley denied final approval of the settlement earlier this month (BI, July 6).