Hospital Care Cut, Man Wins $4.1 Million From His Insurer

In what is believed to be the first jury verdict of its kind in the country, an elderly Riverside County man won a $4.1-million judgment Friday against a Philadelphia-based insurance company that cut off his hospital benefits after a near-fatal auto accident in 1983.

Crippled and now confined to a wheelchair, 70-year-old Julius Warren bought three policies beginning in the early 1970s from Colonial Penn Franklin Insurance Co., the insurer that uses announcer Ed McMahon to pitch its policies for the elderly on television and in mailed brochures.

Believing that his policies entitled him to flat-rate reimbursements, Warren repeatedly filed claims when he was hospitalized for more than a year at the Veterans Administration Hospital in Long Beach after suffering multiple fractures in an accident, but Colonial Penn paid for only 40 days. The company said further hospital care was unnecessary.

“They don’t tell people they reserve the right to make that judgment. They didn’t even consult with his doctor,� said William Shernoff, Warren’s lawyer and a specialist in insurance cases. “What they tell people on TV is not the whole truth. What they tell people in brochures is not the whole truth.�

Attorneys for Colonial Penn could not be reached for comment.

After a 2 1/2-week trial, a Los Angeles Superior Court jury agreed with Shernoff. Deliberating slightly more than two days, panel members Friday agreed unanimously that Colonial Penn had erred when it stopped paying Warren, a decision that was made on the recommendation of a nurse in the company’s Philadelphia office. Most of their deliberations, jurors said later, were over how many millions the elderly Warren should be paid.

“They probably didn’t expect him to live until he got to court,� juror Edward Brown, 45, said after the verdict was announced. “They expected to get off scot-free. . . . They treated this man like dirt.�

Foreman Sol Gelfand, 65, said that “the jury, and these are strong words, felt (Colonial Penn) committed an act of fraud.�

Jurors agreed that not only should Colonial Penn be required to pay Warren more than $100,000 owed him under his policies, but the company also should be forced to pay $4 million in punitive damages.

Believed to be the first punitive award ever against an insurance company in a case involving hospital indemnity plans for the elderly, the judgment is likely to “spread ripples throughout the hospital insurance industry,� a jubilant Shernoff said.

‘Prey on Your Fears’

“They prey on your fears,� Shernoff said. “They take elderly people who are really insecure anyway and they really advertise the hell out of them with brochures and television ads.

“They sell them 10, 15, 20 policies. These people are old, some of them are senile. They don’t know what they are buying.�

Warren was enjoying an active retirement when he decided to buy his first Colonial Penn policy on the advice of fellow members in his Elks Club lodge. He bought the insurance through the Long Beach office of the American Assn. of Retired Persons. Both Colonial Penn and Prudential Insurance Co. policies are sold through the association.

“I didn’t have insurance of any kind and I thought I might as well get some,� Warren explained. “What I thought was if I fell and hurt myself or got sick, this would pay for the hospital bills. . . . I purchased one and then I got letters through the mail from Colonial Penn saying to check my policy and see if it was enough.�

Bought More Policies

Worried that his coverage was not enough, Warren bought a second and then a third, paying $11 to $12 a month for each of them. The policies promised to pay him from $17 to $200 for each day spent in a hospital, his lawyer said.

What two of the three policies failed to mention, Shernoff added, was that Colonial Penn would determine if the hospital stay was necessary.

Warren’s marathon hospitalization began in January, 1983, when he was struck by a car as he walked across a Santa Ana street. With his skull fractured, pelvis crushed, spleen ruptured and more than 100 bones broken, Warren spent the next two months at Orange County’s Fountain Valley Regional Hospital, which specializes in treating accident victims. While Warren was hospitalized there, Colonial Penn paid.

Payments Cut Off

But when he was transferred to the VA hospital in Long Beach for further recuperation and rehabilitation, the dispute began. The company cut off payments 40 days later, explaining that Warren could be adequately cared for in a nursing facility or even at home.

During the trial, however, Warren’s physician testified that the lengthy hospital stay was needed in light of the fact that the elderly patient was unable to walk or even urinate on his own.

“They treated me terrible,� Warren said. “I’m just sure thankful the jury agreed.�

It is expected that the insurance company will appeal.