Wells Fargo’s $240 Million Bogus Account Settlement and Other Legal Developments that Could Impact Insurance Coverage

These four cases could spell ongoing headaches for the organizations involved, and huge payouts for their insurers.
By: | March 21, 2019

College Bribery Lawsuits Begin

Cases: A widespread college bribery scheme made front-page news this week, engulfing actors Lori Loughlin (Aunt Becky from Full House) and Felicity Huffman (an Academy Award nominee) in scandal. Not only has it opened a nationwide discussion about how money impacts college entry, it motivated two Stanford University students to file a federal class-action lawsuit against the eight colleges named in the probe.

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The Los Angeles Times explains: “Erica Olsen and Kalea Woods, who both attend Stanford, allege they were among those cast aside in the admissions process. … The students also claim that since Stanford is linked to the scandal, their degrees may be tainted. One of their concerns is that prospective employers may now question whether they were admitted to the university on their own merits or whether their parents were willing to pay bribes to guarantee their admission, according to the lawsuit.”

It even led to a $500 billion (yes, with a “b”) lawsuit filed in California Superior Court by Oakland school teacher Jennifer Kay Toy. USA Today explains: “In the lawsuit, Toy said her son Joshua wasn’t admitted to several universities where the massive cheating scandal took place, despite having a 4.2 grade point average. ‘I’m outraged and hurt because I feel that my son, my only child, was denied access to a college not because he failed to work and study hard enough but because wealthy individuals felt that it was OK to lie, cheat, steal and bribe their children’s way into a good college,’ Toy said.”

Scorecard: It’s incredibly early to know if the lawsuits have legs — but they highlight the widely varied effects of the scandal. Not only are students and families upset about losing admission placement to families that offered bribes — existing students are worried that the value of their degrees will plummet. Also, $500 billion is a very, very high high number. But the reputational damage to Loughlin, Huffman, other high-profile people implicated in the scandal is sure to sting for a long time. Meanwhile, the United States college entry system will certainly face added scrutiny.

Takeaway: It’s not hard to imagine other class-action lawsuits being filed against universities and people implicated in Operation Varsity Blues by people who feel cheated by the system.

Johnson & Johnson Ordered to Pay $29 Million Over Talc, Asbestos

Case: A Superior Court in California has ordered Johnson & Johnson to pay $29 million to Teresa Leavitt, who claimed that talc powder products contained asbestos and caused cancer. She was diagnosed with mesothelioma (which is associated with asbestos) and contended that Johnson & Johnson knowingly hid the harmful chemical. Johnson & Johnson claimed they’ve tested the product for decades and that it doesn’t contain asbestos or cause cancer.

The New York Times explains further: “More than 13,000 plaintiffs have sued Johnson & Johnson over what they say are cancers caused by its talc products. The New York Times reported last year that the company had spent decades trying to keep negative information about the potential risk of asbestos contamination from reaching the public.”

Scorecard: Johnson & Johnson shares fell 1 percent after the news.

Takeaway: In July, 22 women and their families were awarded $4.69 billion to settle claims that Johnson & Johnson baby powder causes ovarian cancer. Meanwhile the Justice Department and the Securities and Exchange Commission has subpoenaed the company for more insight into their talc products. The company’s once stout reputation could be in serious jeopardy.

Wells Fargo Reaches $240 Million Settlement Over Bogus Accounts

Case: Wells Fargo has reached a $240 million settlement with shareholders in the wake of its highly publicized scandal regarding the creation of millions of unauthorized accounts and unwarranted fees. Shareholders argued that the actions breached fiduciary duties and damaged the company.

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Scorecard: Insurers will be on the hook for these claims. CNN explains: “In a common practice, Wells Fargo executives and directors took out insurance policies to protect them from shareholder lawsuits. Under the terms of the settlement, insurers for 20 current and former Wells Fargo executives and directors would pay $240 million to shareholders.”

Takeaway: The fallout from the scandal is hardly over. The company’s CEO was grilled by Congress just a few days ago; a prominent Democrat running for President called for his firing, and plenty of people are still upset about the scandal. Don’t expect it to go away anytime soon.

Health Insurer Sued for Open-Enrollment “Bait-and Switch”

Case: Thousands of people in Georgia have filed a federal class action lawsuit against health insurer Anthem, claiming the company duped them into thinking they had access to a health care system that Anthem had cut ties with months earlier. They’re seeking $5 million in damages. One of the plaintiffs, Frances Kirby, said he’s been treated at the health system (called WellStar) for 20 years. Kirby told 11alive news: “It’s like the bait and switch. We start seeing the doctors in January and are told, ‘Oh, you know as of Feb. 4, WellStar will no longer be in the system.’ ”

Scorecard: The case is in the preliminary stages and there’s no telling what the outcome will be. Anthem pledged to extend benefits to WellStar for 90 days.

Takeaway: Communication is crucial, especially when making changes to people’s health care options.

Jared Shelly is a journalist based in Philadelphia. He can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]