A Philadelphia-area woman with AIDS has received $250,000 from a viatical firm, after she sued it in 2005 for allegedly threatening to stop paying her health-insurance premiums.
The woman, identified in court papers as “M. Smith,” was diagnosed with cancer and AIDS in 1992 and given only two years to live. In 1994, she sold her $150,000 life-insurance policy to Life Partners Inc. of Waco, Texas, for $90,000.
As part of the deal, Life Partners allegedly agreed to pay Smith’s health-insurance premiums until she died. Between 1996-2009, those premium payments totaled about $170,000, according to court papers.
If Smith had died when predicted, Life Partners would have profited by collecting the proceeds from her life-insurance policy without having to continue paying her health premiums.
But Smith, now 53, continued to live healthily, and Life Partners was required to continue paying her health-insurance premiums.
R. Scott Peden, president of Life Partners, had no comment for this story.
Smith sued Life Partners in 2005, after the company twice threatened — in writing — to stop paying her health-insurance premiums, according to court papers.
The following year, a New Jersey judge ordered Life Partners to place $837,357 into a fund to cover future payments for Smith’s health premiums.
However, Life Partners appealed the order.
In October 2007, a New Jersey appellate court overturned the order and sent the case back to the lower court to determine an appropriate remedy for Smith.
Rather than proceed to trial, both sides settled the case with the $250,000 cash payment to Smith. In the settlement agreement, Life Partners acknowledged no wrongdoing.
Ronda B. Goldfein, executive director of the AIDS Law Project of Pennsylvania, served as an attorney for Smith. She said the $250,000 settlement was the largest amount ever obtained for a client in the organization’s 21-year history.
“Now Ms. Smith has the funds to arrange for her appropriate life-time health insurance, plus peace of mind, which is priceless,” Goldfein told PGN.
She said Smith has a basic Blue Cross policy, and the $250,000 will be used to supplement her coverage to pay for medications, doctors’ visits and medical procedures that Blue Cross doesn’t cover.
Goldfein described Smith’s previous health insurance, which Life Partners funded, as a “Cadillac” policy that covered Smith’s medical needs with minimal co-pays.
“We should all have access to a Cadillac policy,” Goldfein added. “But in fact, Ms. Smith didn’t need a Cadillac policy; she needed financial assistance for a satisfactory policy. We’ve given her that — along with peace of mind.”
Goldfein and other law-project staffers amassed hundreds of work hours on the case over several years, she said.
“The case dragged on for almost five years, and the other side challenged our client every step of the way,” Goldfein said. “I think Life Partners underestimated that Ms. Smith would be able to find lawyers that would put up this much of a fight.”
Goldfein said the settlement money is non-taxable.
“The IRS has determined that these types of transactions are non-taxable events,” Goldfein said. “She received the money on June 1. I would hope that she has good investment advice.”
Goldfein said the settlement obviated the need for a trial, but Smith was prepared for a trial if necessary.
“We were prepared to take whatever precautions necessary to protect her identity,” Goldfein added. “With this settlement, we showed that you don’t get to push around people with AIDS because you think they’re sick and can’t fight back.”
Tim Cwiek can be reached at (215) 625-8501, ext. 208.