July 28, 2011
Another Significant Award in Washington County

Another Significant Award in Washington County

I am pleased to announce that the court issued its decision on July 27, 2011, awarding $600,496.44 to the Washington County Board of Developmental Disabilities—not counting attorney’s fees yet to be awarded. Unlike my previous post, this was my trial.

I represented the Washington County Board of Developmental Disabilities regarding their employee health plan.  In 2006, the WCBDD switched to a partially-self-funded health plan for its employees.  Fully-insured health plans had started to become prohibitively expensive earlier in the decade. To save costs, the WCBDD designed a health plan in which it would pay its employee’s health claims.  The agency hired a third-party administrator, Employer Benefits Services of Ohio, to administer the plan.

In order to protect the agency, Employer Benefit Services of Ohio recommended a “stop loss” insurer so that WCBDD would be protected against large claims and protected if the employees aggregately made claims beyond a set threshold.   United Re AG was the “stop loss” insurer that Employer Benefit Services recommended.

Unfortunately, as it turned out, EBS recommended a bad “stop loss” insurer.  United Re turned out to be a sham.  It was not an insurance company at all.  It had no insurance rating or status anywhere in the U.S. or the world.   As it turns out, United Re was a scam, a Ponzi scheme that took employer health plan contributions.

By 2007, the WCBDD had paid $200,000 in health claim beyond its set “aggregate” threshold.  It made its claim with United Re.  It was never paid.

United Re did this to a number of other employers.  Sometimes the people at United Re would make up bogus reasons for denial.  Other times, they ignored the claims altogether, as they did with the WCBDD.

We sued EBS of Ohio for its negligence in recommending United Re.  They ended up declaring bankruptcy.

We also sued United Re.  They consented to a judgment.  Of course, no money there.

We also sued Hugh Scott, a lawyer from Texas.  He was the President of United Re and also its chief counsel.  More importantly, we asserted that he was also United Re’s sole shareholder.  We asked the Court to hold Hugh Scott personally responsible.

A little history on Mr. Scott.  In the 1990’s, he was involved in another scam involving yogurt franchises.  A group of investors sued, apparently claiming to be bilked out of millions.  A jury found Hugh Scott to be liable.  He declared bankruptcy, yet still had a $1.5 million judgment, which apparently has never been paid.

Judge Ed Lane, of the Washington County Court of Common Pleas, also believed that Hugh Scott had perpetrated a fraud against the Washington County Board of Developmental Disabilities.  Per Judge Lane, “Hugh Scott was an active participant in the United Re fraud.”  Further, per Judge Lane, “Employer contributions were used to fund ongoing claims, and to line the pockets of Hugh Scott, in a casebook Ponzi scheme.”

The court awarded $200,496.44 in compensatory damages—damages to compensate the agency for its expected insurance benefit.  The court also awarded $400,000 in punitive damages.  These damages have been assessed against Hugh Scott personally.  He now owes  over $600,000.

The court also ordered Hugh Scott to pay the attorney’s fees incurred by the WCBDD.  The amount of these fees will be determined at a later hearing.

Justice was done, in our opinion.  Of course, there is no guarantee that we will be able to collect this award.  But, we will do all that we can to enforce the judgment.