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Zalesiak v. Unumprovident Corp.

December 12, 2007

DEBORAH ZALESIAK, AS SPECIAL ADMINISTRATOR OF THE ESTATE OF BARBARA ABRAHAMSON, DECEASED, PLAINTIFF,
v.
UNUMPROVIDENT CORPORATION, AND THE PAUL REVERE PRISM 2 GROUP INSURANCE TRUST, DEFENDANT .



The opinion of the court was delivered by: Virginia M. Kendall United States District Judge

Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Plaintiff Deborah Zalesiak ("Zalesiak"), as Special Administrator of the Estate of Barbara Abrahamson ("Abrahamson"), filed an eight-count Complaint against Defendants UnumProvident Corporation ("UPC") and The Paul Revere Life Insurance Company in the Circuit Court of Cook County, Illinois, setting forth, as counts 1 - 7 of the complaint, causes of action for bad faith, fraudulent misrepresentation, negligent misrepresentation, negligence, intentional infliction of emotional distress, negligent infliction of emotional distress, wrongful death, and, as count 8 of the complaint, a cause of action for violation of the Racketeer Influenced and Corrupt Organizations ("RICO") statute, 18 U.S.C. § 1961, et. seq. Defendants removed the action to this Court on the grounds that Zalesiak's state law claims were completely preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et. seq. Thereafter, Defendants moved to dismiss counts 1 - 7 of the Complaint as completely preempted by ERISA and also moved to dismiss the RICO count for failure to properly allege a violation of the RICO statute.

Zalesiak responded to Defendants' Motion to Dismiss with an amended complaint, setting forth only two causes action: the first under RICO and the second under ERISA. Defendants' moved to dismiss the amended complaint arguing (1) that Zalesiak's RICO claim was preempted by ERISA; (2) that Zalesiak has otherwise failed to state a RICO claim; and (3) that Zalesiak's ERISA claim must be dismissed for its failure to name the benefit plan as a defendant. This Court granted Defendants' Motion on the basis that Zalesiak failed to state a RICO claim and failed to bring her ERISA action against the Plan as an Entity. Zalesiak filed a Second Amended Complaint this time against UPC and The Paul Revere Prism 2 Group Insurance Trust ("PRL," together with UPC, "Defendants") . Now before the Court is UPC's Motion to Dismiss Count I of the Second Amended Complaint-- Zalesiak's RICO claim.

For the reasons stated herein, Count I is dismissed with prejudice.

STATEMENT OF FACTS

Zalesiak alleges that UPC offered disability insurance policies to employers in the state of Illinois including Harris Hospital Supply, Inc. ("Harris"), where Abrahamson was employed was a wholly-owned subsidiary of UPC and the plan administrator for the disability insurance policies sold by UPC. In its capacity as plan administrator, PRL served as an agent of UPC.

On and before March 4, 1997 through July 30, 2004, PRL regularly retained the services of HealthSouth Rehabilitation Center ("HealthSouth") to provide assistance and support for its evaluation of long term disability benefit claims. Specifically, PRL retained HealthSouth to conduct functional capacity assessments ("FCA") of long term disability claimants including Abrahamson. During that time period, PRL would refer to the results of HealthSouth's FCAs as a basis for PRL's denial of claims for long term disability ("LTD") benefits. Zalesiak claims that an enterprise existed among UPC, PRL, HealthSouth and Harris whereby employment compensation packages would be purchased at a reduced rate by Harris from UPC. UPC offered disability benefits packages at a reduced rate to employers, including Harris, by limiting is own costs through unjustified and false denials of benefit claims. Zalesiak claims that in furtherance of the enterprise to defraud and in its capacity as the plan administrator, PRL maintained exclusive authority and control over all decisions related to the administration of the benefit plans. During the March 4, 1997 through July 30, 2004 time period, PRL managed and controlled the enterprise by controlling the underwriting, offering, eligibility, administration, cost and profit associated with disability insurance polices that UPC sold. Harris profited by limiting its cost in providing LTD benefits.

Sometime prior to March 4, 1997, Harris purchased Group Disability Policy Number G56120, U1, M1 ("the policy") from UPC. Abrahamson was an employee of Harris and certificate holder under the policy. According to Zalesiak, on or about March 4, 1997, Abrahamson began experiencing severe pain and other physical problems such that she became disabled. She submitted a disability claim on March 4, 1997 providing her medical records in support of her disability. On July 28, 1997, PRL advised Abrahamson via the U.S. Mail that she was not qualified to received disability benefits under the terms of the policy. PRL's agent, Sandra DeGoff ("DeGoff") sent the letter knowing that a review of the material Abrahamson provided had not been conducted and/or knowing that the review indicated Abrahamson was indeed qualified to receive disability benefits. In doing so, PRL materially misrepresented that Abrahamson was not entitled to disability benefits with the intent to frustrate her efforts to obtain the benefits to the extent that she would abandon her plan to pursue them.

On August 21, 1997, Abrahamson submitted a written appeal of PRL's July 29, 1997 decision. On November 1, 1997, Janet Smith ("Smith") of PRL sent a letter indicating that the July 29, 1997 decision had been reversed and that Abrahamson's claim for disability benefits was approved.

On October 29, 1998, Kelly Briggs ("Briggs"), a PRL employee, wrote to Abrahamson and stated that her disability benefits were no longer payable and required Abrahamson to submit additional information to justify her claim. According to Zalesiak, Briggs did so knowing that Abrahamson was still entitled to receive disability benefits and materially misrepresented that Abrahamson was not entitled to them with the intent to frustrate her efforts to pursue her claim. Abrahamson submitted additional medical records. In June 1999, Kari Leudtke ("Leudtke"), a PRL employee, wrote that Abrahamson's claims were reinstated.

Approximately one year later, Leudtke wrote to Abrahamson that her disability benefits were no longer payable and required Abrahamson to submit additional information to justify her claim. Zalesiak alleges that Leudtke did so knowing Abrahamson was entitled to receive benefits and materially misrepresented that she was not so entitled in order to frustrate Abrahamson's efforts to pursue her claim. On September 25, 2000, Abrahamson appealed the July 22, 2000 decision denying her disability benefits. Leudtke wrote Abrahamson on April 25, 2001 and affirmed the July 22, 2000 decision. Again, Zalesiak alleges that PRL denied her claims and affirmed the decision not because Abrahamson wasn't disabled, but in order to frustrate her efforts to pursue her claim.

On March 4, 2001, Abrahamson submitted additional evidence, including medical records, to support her disability claim. On February 21, 2002, Leudtke wrote Abrahamson stating that her claim for disability benefits had been reviewed and her benefits reinstated. One year later, PRL wrote Abrahamson requesting additional information to justify her claim which Zalesiak alleges was a material misrepresentation. On May 27, 2003, Abrahamson filed an appeal. On July 11, 2003, PRL requested additional time to review Abrahamson's appeal even though they knew that she was entitled to disability benefits. On July 17, 2003, PRL affirmed its February 2, 2003 decision. Abrahamson submitted additional records in November 2003 and PRL responded on November 13, 2003 and December 15, 2003 stating that it needed additional time to review her claim. PRL did so knowing that Abrahamson was entitled to review disability benefits.

On January 20, 2004, Abrahamson submitted more medical records and PRL wrote on February 4, 2004 and March 3, 2004 that it needed more time to review them. On March 24, 2004, Leudtke wrote that PRL affirmed its February 2, 2003 decision to deny Abrahamson's disability benefits. PRL did so knowing that she was entitled to review them. This pattern continued through July 30, 2004 whereby Abrahamson continued to submit medical records, PRL asked for time to review them, and PRL affirmed its decision to deny Abrahamson's benefits. On July 30, 2004, PRL sent a letter to Abrahamson ...


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