Jury Awards Man $25 Million in Health Insurance Fraud Case : Courts: Transport Life policy covered only $3,400 out of $47,000 bill for cancer treatments.

Four years ago, when Norman Jensen was suffering from cancer, he was dismayed to learn the health insurance policy he bought to protect him paid only a fraction of his bills.

But on Friday a Los Angeles Superior Court jury awarded Jensen $25 million in punitive damages, agreeing that he was defrauded by Transport Life Insurance Co.

“There are so many people like me who think they have coverage and when they get sick find they’re left hanging,” Jensen, a 52-year-old musician, said after hearing the verdict. He was also awarded $100,000 in compensatory damages for emotional stress.

Tom Herlihy, attorney for Transport Life, declined to comment. But a spokeswoman for the Texas-based company said: “We are confident we will be successful on an appeal, and that the award of punitive damages was improper.”

The large award came as national attention has been drawn to President Clinton’s health care reforms, which seek to guarantee medical care to all Americans. “One reason this has been a big national concern is because of things like this, what happened to me,” said Jensen, a Burbank resident.

Jensen said he purchased what he believed was a major medical policy from Transport Life after a telephone solicitor called his home. The policy reportedly had a “lifetime maximum” of $1,000,000. But after Jensen contracted non-Hodgkin’s lymphoma in 1989, the company paid only $3,400 out of $47,000 in medical bills.

He bought the policy after his mother broke her hip, and urged him to buy health insurance as a safety precaution. “It was a fluke I got coverage at all. I never thought I’d need it,” Jensen said. But he was relieved he had purchased the policy when a doctor found cancer while treating him for a wrenched hip.

Company brochures, many of them exhibited at the two-week trial, appeared to offer Jensen coverage for surgery, hospital and home care, and private nursing as well as doctor visits and outpatient services. First, Jensen said, he found the insurance company had avoided paying his doctors. “They kept asking for completed claim forms. I’d send them in, and the next month it would happen again,” he said.

When Jensen emerged from a hospital stay for a lung infection, he discovered that coverage for outpatient services--which included chemotherapy--was limited to $400. In fact, Jensen found his policy didn’t cover radiation or chemotherapy.

Jensen received chemotherapy, he said, only because his doctor treated him without payment. Jensen’s cancer is now in remission, but he is still recovering from side effects from the disease and treatments.

William Shernoff, one of Jensen’s two attorneys, asked the jury to award high punitive damages, which are given to punish or act as a deterrent. “They sold this product like it was snake oil,” he said. “An example should be set here, not only to this company but to others that may want to do the same thing.” He asked jurors to consider $18 million to $40 million, based on Transport’s listed assets of $520 million and revenues of $400 million in 1992.

The jury deliberated a little more than one day. “The only real problem was deciding how much money, coming up with a dollar figure,” juror John Hamm of Gardena said.

Transport Life contended that its advertisements and brochures were not misleading, and that the sales agent who sold Jensen his policy not only acted against company instructions, but used sales materials the company had never seen or endorsed. The agent, company officials said, was not an employee of Transport. After Jensen filed his suit, Transport paid his medical claims in full.

The company is a subsidiary of Primerica Corp., the huge, Manhattan-based financial services company that last week agreed to acquire insurance giant Travelers Corp.

The State Department of Insurance lists the company as the 51st-largest insurance seller under its jurisdiction.

In a ranking of annual consumer complaints among California’s largest health and disability insurers, State Insurance Commissioner John Garamendi listed Transport Life as second worst in volume of complaints in 1990, and third worst in 1991. Company officials said its complaints were not high, and disputed the way California compiles statistics.

According to documents presented during the trial, Transport had been investigated and fined by the state of New Jersey for misrepresenting its health insurance to customers there, and was issued a cease and desist order for similar activities in Washington state. During closing arguments before the jury, company attorney Herlihy said customer complaints in those states were resolved and any agents violating company policy were fired.

California insurance officials said there are no current enforcement proceedings against Transport Life. The company stopped selling the particular policy Jensen bought in 1991. A Transport spokeswoman said she did not know how many clients the company had in California.

Times staff writer Thomas S. Mulligan contributed to this article.