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Sales force severance suit headed to trial

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CHICAGO--Ninety former employees of CNA Financial Corp. can proceed to trial on allegations the insurer wrongfully denied them severance benefits and for federal common law fraud, a federal judge in Chicago has ruled.

However, the judge dismissed a breach of contract allegation in his July 24 opinion in Wayne Rosenberg vs. CNA Financial Corp. and the CNA Severance Plan.

The decision focused on whether the plaintiffs had received adequate and timely notice under the Employee Retirement Income Security Act of 1974 that their severance plan had been modified to deny them severance benefits.

Plaintiffs contend Chicago-based CNA saved more than $30 million by wrongfully concealing the severance plan amendment, according to the decision.

The plaintiffs were working as sales representatives when CNA sold its life business operations to Swiss Reinsurance Co. in 2004. Their positions were eliminated, and they were terminated on April 5, 2004.

CNA later denied their claims to severance benefits.

According to the decision, CNA updated its severance pay plan on its intranet site in August 2003, but "did not highlight, underline, or draw attention to the newly added language" that denied severance benefits to the employees.

The employees were notified on CNA's intranet and by a copy of the severance plan that was sent to their homes on March 31, 2004, that they were not eligible to receive the benefits.

"By any objective understanding of CNA's promise to timely notify its employees of material changes to their benefit plans, it was unreasonable for CNA to knowingly wait to tell plaintiffs of the amendment disqualifying them from severance benefits until almost seven months after the amendment took effect, and four days before each was terminated from employment," said Judge James F. Holderman in his decision.

A spokesman for CNA, which had sought to dismiss the suit, had no comment.