Hartford Insurance puts up $26 million to settle 'Colosuss' class action

Steve Korris Jan. 18, 2007, 8:16pm

TEXARKANA, Ark. - For $26 million, Hartford Insurance bought its way out of a colossal lawsuit and joined the plaintiff team.

Hartford in October reached agreement with plaintiffs who alleged in Miller County circuit court that the insurer improperly reduced payouts on injuries.

Other defendants cried foul, charging that Hartford's settlement would entice their policyholders to switch to Hartford.

Circuit Judge Kirk Johnson set a Feb. 13 fairness hearing on the settlement.

Lead plaintiff Georgia Hensley sued Hartford and hundreds of other insurers Feb. 7, 2005, just before the national Class Action Fairness Act took effect.

Attorneys John Goodson and Michael Angelovich of Texarkana, Texas, claimed insurers cheated accident victims with crooked software called Colossus.

They named software provider Computer Sciences Corporation as first defendant.

They alleged that all defendants conspired in relying on the software.

They sought to certify Hensley as class representative of everyone in the United States whose injury claim went through Colossus.

They wrote that the class would number tens or hundreds of thousands.

They amended their complaint five times in nine days, to add plaintiffs.

Most defendants never filed any response to the suit because they were never served.

Allstate Insurance removed the suit to U.S. district court in Texarkana, claiming plaintiffs fraudulently joined defendants to avoid federal jurisdiction.

Allstate argued that Hensley could not prove a conspiracy.

U.S. District Judge Harry Barnes found no fraudulent joinder and remanded the suit to Miller County.

He wrote that conspiracy might be hard to prove but plaintiffs deserved an opportunity to prove it.

Defendants appealed to the U.S. Court of Appeals, Eighth Circuit.

While awaiting that decision defendants by the dozens moved to dismiss for lack of personal jurisdiction. They argued that they did no business in Arkansas.

Progressive Insurance further argued that plaintiffs lacked standing to sue because none of them had a relationship with Progressive.

Attorney William Waddell of Little Rock wrote, "Standing is not bestowed upon a plaintiff by virtue of the purported representation of a class of persons."

For a group of defendants, Elizabeth Fletcher of Little Rock moved to dismiss. She wrote, "The fact that insurers strive to not over pay claims is not illegal."

Lead defendant Computer Sciences removed the suit to federal court. Last March, Barnes again remanded.

In June the Eighth Circuit affirmed Barnes in his first remand order.

In July defense attorney Gary Nutter wrote in a memo on personal jurisdiction that plaintiffs offered no facts to support what each defendant did.

He wrote, "Plaintiffs lump together 538 companies (including companies that don't sell insurance at all and companies that are not even legal entities) and assert without any factual basis whatsoever that all of them are subject to the personal jurisdiction of this Court."

He wrote that two of 14 plaintiffs alleged that their accidents happened in Arkansas. He wrote that four plaintiffs resided in Arkansas.

He wrote that plaintiffs asked the court to adjudicate claims of nonresidents against nonresidents.

Meanwhile Hartford negotiated with Goodson and Angelovich on a settlement that would split the Colossus class into two classes.

When other defendants learned of the negotiations, they objected.

Philip Kaplan of Little Rock wrote Oct. 12 that the settlement would violate due process rights of other defendants.

He wrote that it would create a conflict between the two classes. He wrote that the second class would receive nothing for giving up the right to sue.

He wrote that Hartford created an illusory class to prejudice other defendants.

He wrote that plaintiffs, by releasing an alleged conspirator, proved that their conspiracy claim was without merit.

He wrote that other defendants needed to conduct discovery on Hartford.

He wrote that the proposed notice of settlement would encourage policyholders to cancel policies and switch to Hartford.

He wrote that the notice would harm reputations of insurers.

Angelovich responded the next day that Hartford would make cash payments to class members and Hartford would stop using Colossus.

He wrote that any embarrassment from the settlement notice was speculative.

He accused other defendants of holding the settlement hostage.

On Oct. 19, Goodson filed a separate Colossus suit against Hartford.

On Nov. 15, Goodson and Hartford filed a 44 page stipulation of settlement. It provided legal fees, costs and expenses not to exceed $26 million.

Judge Johnson has not certified the suit as a class action. He has set a Nov. 5 hearing on certification.

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