For Commercial Insurers, Tobacco Suits May Not Fit

While state governments and Blue Cross and Blue Shield plans around the country are suing Big Tobacco to recover costs of cigarette-induced illness, commercial insurers so far are holding their fire.

Joining the tobacco litigation presents some big insurers with conflicts that are not faced by the mostly nonprofit “Blues,” say lawyers, industry analysts and other experts.

Some insurers, for example, could find themselves on both sides of the dispute if their property-casualty units had sold liability policies to tobacco companies protecting them from legal judgments. Even insurers that offer only health coverage could run into problems if the employers buying their plans include tobacco companies or others with close ties to the industry.

A Washington, D.C., lawyer for one of the nation’s biggest health insurers said litigation is not a top priority, but he also noted that the “Blue Cross suits put it a little higher on our radar screens.”

On Wednesday, Blue Cross and Blue Shield groups from 38 states filed three federal lawsuits against tobacco giants, accusing them of fraud, misrepresentation and violations of federal racketeering and antitrust laws.

If successful, the suits could lead to awards in the billions of dollars. But the tobacco industry, which has repelled many previous legal attacks, predicted a similar fate for the latest actions.

The lawsuits by the Blue plans, however, have triggered intense discussion. The Health Insurance Assn. of America, a leading trade association for commercial insurers, has decided to raise the issue “in a general sense” at its next board meeting in June, spokesman Richard Coorsh said Thursday.

One of the group’s largest members is Wellpoint Health Networks Inc. of Woodland Hills, the parent of Blue Cross of California. Wellpoint, one of three for-profit “Blues” groups, opted not to join the lawsuit filed Wednesday but has declined to detail its reasons.

Trigon Heathcare Inc. of Richmond, Va., another for-profit Blue Cross affiliate, also opted out of the suit.

“It is an option that remains open,” spokeswoman Brooke Taylor said, adding that the company would watch what happens with the Minnesota lawsuit before making its decision.

Whether to join the litigation parade poses an especially tricky problem for CNA Financial, the big Chicago-based insurer. CNA, traded on the New York Stock Exchange, is 84% owned by Loews Corp., parent of Lorillard Tobacco Co., the No. 4 U.S. cigarette maker in sales.

CNA declined to comment on the tobacco litigation, a spokesman said, although he added that the company makes its policy decisions “autonomously.”

In Washington, former Sen. Dave Durenberger is trying to recruit commercial insurers to join the fray but so far without much success.

Durenberger, a Minnesota Republican, heads the lobbying group Health Payers Alliance for Equitable Tobacco Policy. The group was formed last year, when some insurers feared that they and their customers would be cut out of the massive tobacco settlement proposed by state attorneys general.

Some firms doubt that there is much bottom-line potential in the suits, since most of any recovery probably would be passed along to policyholders, Durenberger said.

Blue Cross and Blue Shield of Minnesota, co-plaintiff in an important tobacco case brought by that state’s attorney general, was until Wednesday the only health plan suing the industry.

“That lawsuit should have been an example to all insurance companies of what they should do on this highly important issue,” Durenberger said. “From a [public relations] standpoint, they believe it’s worth the dollars invested even if they don’t get the amount they’re suing for.”